Global Sustainable Investing: ESG (Environmental, Social, Governance) Market Size & Share Analysis – Growth Trends & Forecasts (2024-2029)
The Global Sustainable Investing Market is Segmented by Investment Type (Equity Investments, Fixed Income Investments and Real Assets (e.g., real estate, infrastructure), By Asset Class (Public Equity, Private Equity, Bonds (green bonds, sustainability bonds), Mutual Funds, By Investor Type (Institutional Investors (e.g., pension funds, insurance companies), Retail Investors, Family Offices and High-Net-Worth Individuals (HNWIs), By End-User (Renewable Energy, Sustainable Agriculture, Clean Technology, Healthcare and Education) and By Region (North America, Europe, Asia-Pacific, Latin America and Middle East and Africa). The report offers market size and forecasts for global sustainable investing are provided in terms of value (USD) for all the above segments.
Market Overview:
Sustainable investing is becoming an increasingly important aspect of financial markets. Many investors are swayed by the prospect of earning financial returns while also responding to the growing demand for greater attention to companies’ environmental, social, and governance (ESG) scores.
The growth of sustainable investment has been amazing. Recent statistics show that ESG-focused funds’ assets under management have grown, showing a growing demand for responsible investment solutions. Demand for sustainable investing solutions is being driven by institutional investors such as pension funds and endowments, as well as individual investors who want to align their portfolios with their convictions.
Several industries have emerged as key players in the sustainable investment landscape. Renewable energy, clean technology, and healthcare are among the leading areas receiving ESG financing. These industries are recognized as crucial for addressing global challenges such as climate change and public health. Furthermore, companies with strong ESG performance are widely recognized for their ability to deliver superior financial results, which accelerates the growth of sustainable investing.
Demand, supply, and legislation all contribute to the expansion of ESG investing. Investment managers view ESG as a commercial opportunity, with investor demands driving innovation and development. However, passion and strategies vary greatly between businesses and markets. Many businesses still need to strengthen their vision and ESG investment approach.
In the past year, there has been a surge in global interest in sustainable investing due to factors such as inflation (56%), climate science results (53%), and financial performance (52%). Investors are increasingly interested in sustainable investing, even if they believe their investments outperformed traditional ones. Sustainability-focused investors prioritize long-term investments and may not be as concerned with short-term swings.
Existing sustainable financing vehicles, such as green and social bonds, as well as renewable energy project funding, are expected to expand further. However, this mammoth change toward a low-carbon global economy will necessitate extraordinary economic collaboration and innovation in order to implement new technologies and create new business models.
Market Trends:
Market Trend 1: Institutional Investors Shift Towards ESG-Driven Investment Strategies
Institutional investors understand the long-term environmental, social, and governance risks. Climate change, resource shortages, regulatory changes, and societal unrest can have a substantial impact on a company’s financial performance. By incorporating ESG aspects into their investing decisions, institutional investors can better detect and reduce risks, protecting their portfolios from potential losses. Investing in companies with solid environmental policies, for example, lowers the risk of regulatory penalties and environmental responsibility.
ESG investing has gained traction among institutional investors, and it has evolved to meet a wide range of portfolio objectives across asset classes and strategies. Most asset owners now consider sustainable aspects or seek ESG themes, and many have set sustainability targets. The ongoing debate between investors, firms, sovereigns, and regulators is increasingly centered on practical implementation across the investing world.
Institutional investors are pursuing a variety of ESG-related themes throughout their portfolios in order to advance sustainability goals on important environmental and social challenges. They include Climate change, Diversity, Equity, and Inclusion, Clean energy transition, Water management, Waste Management, Sustainable Agriculture Practices, Sustainable forestry, Biodiversity, Nutrition and Smart City (Grid Infrastructure.
Graph: Share of investors that view economic, social, and, governance (ESG) as integral in credit analysis worldwide in 2022
Market Trend 2: Europe is leading the ESG investment Market
In 2023, the sustainable fund market grew slowly but steadily. Globally, there are now 7,485 sustainability-themed funds, a 7% increase from the previous year. Europe and the United States continue to hold the majority of these funds, accounting for 73% and 9% of the global market, respectively. In 2023, the total assets of sustainable funds reached about USD 3 trillion, primarily due to soaring equities prices in Europe and the US. Europe has about USD 2.5 trillion in assets, accounting for 85% of the worldwide market.
Approximately EUR 7 trillion of Europe’s assets are invested in ESG funds or sustainability-focused strategies. As a result, the EU Taxonomy, SFDR, and MiFID II have an influence on the majority of fund-based capital in Europe. This has had an impact on a variety of elements, including product launches and capital flows, as well as transparency levels for end investors.
Sustainable finance is undergoing a shift in Europe. Europe dominates the sustainability fund industry, accounting for 83% of global net assets. The US and Asia have only 1% and 5% of total net assets, respectively, compared to 16% in Europe. Despite climate change, new regulations, and shifting investment preferences, these regions will gradually catch up in the future.
Competitive Landscape:
The sustainable finance market is relatively consolidated, with several companies in it. BlackRock, Vanguard Group, State Street Global Advisors, JPMorgan Chase, and Citigroup are among the world’s largest investors. During the study period, market companies are also engaged in mergers and acquisitions, and alliances are aimed at increasing their market share. During the forecast period, the market has growth opportunities, which are expected to increase competition. However, as a result of product innovation and technical advancement, mid-size to small enterprises are extending their market presence by winning new contracts and entering previously unexplored markets are among the global market’s major players. To acquire a competitive advantage over their rivals, the corporations are working on a variety of strategic activities such as new product development, partnerships, collaborations, and agreements.
Major Players:
- BlackRock
- BNP Paribas Asset Management
- Goldman Sachs Asset Management
- J.P. Morgan Asset Management
- Morgan Stanley Investment Management
- Northern Trust Asset Management
- PIMCO
- State Street Global Advisors
- UBS Group
- Vanguard Group
Recent Developments:
- In June 2024, BlackRock, an asset management business, introduced a series of climate transition-aware exchange-traded funds (ETFs) in Europe while withdrawing from ESG investing in the United States. The new iShares MSCI Climate Transition Aware UCITS ETFs, categorized as Article 8 under the EU’s Sustainable Finance Disclosure Regulation, seek to expose investors to companies leading the transition to a low-carbon economy.
- In October 2023, ClearBridge Investments and Franklin Templeton have launched a new value equity fund called the FTGF ClearBridge Global Sustainability Improvers Fund. This new fund intends to invest in firms that are actively developing their Environmental, Social, and Governance (ESG) standards, rather than focusing primarily on those with already strong ESG profiles.
1. INTRODUCTION
1.1 Study Assumptions and Market Definition
1.2 Scope of the Study
2. RESEARCH METHODOLOGY
3. EXECUTIVE SUMMARY
4. MARKET DYNAMICS
4.1 Market Overview
4.2 Market Drivers
4.2.1 Growing Demand from Institutional Investors
4.2.2 Rise in the Issuance of Green Bonds
4.3 Market Restraints
4.3.1 Lack of Standardization in ESG Metrics
4.3.2 Limited Data Availability
4.4 Market Opportunities
4.4.1 Growing Demand for Green Bonds
4.4.2 Development of Sustainable Investment Products
4.5 Porter’s Five Forces Analysis
4.5.1 Threat of New Entrants
4.5.2 Bargaining Power of Buyers/Consumers
4.5.3 Bargaining Power of Suppliers
4.5.4 Threat of Substitutes
4.5.5 Intensity of Competitive Rivalry
4.6 Insights on Technological Innovations in the Market
4.7 Impact of COVID-19 on the Market
5. MARKET SEGMENTATION
5.1 By Investment Type
5.1.1 Equity Investments
5.1.2 Fixed Income Investments
5.1.3 Real Assets (e.g., real estate, infrastructure)
5.2 By Asset Class
5.2.1 Public Equity
5.2.2 Private Equity
5.2.3 Bonds
5.2.4 Mutual Funds
5.3 By Investor Type
5.3.1 Institutional Investors
5.3.2 Retail Investors
5.3.3 Family Offices
5.3.4 High-Net-Worth Individuals (HNWIs)
5.4 By End-User
5.4.1 Renewable Energy
5.4.2 Sustainable Agriculture
5.4.3 Clean Technology
5.4.4 Healthcare
5.4.5 Education
5.5 Geography
5.5.1 North America
5.5.2 Europe
5.5.3 Asia-Pacific
5.5.4 Latin America
5.5.5 Middle East and Africa
6. COMPETITIVE LANDSCAPE
6.1 Market Concentration
6.2 Company Profiles
6.2.1 BlackRock
6.2.2 Vanguard Group
6.2.3 State Street Global Advisors
6.2.4 Morgan Stanley Investment Management
6.2.5 JP Morgan Asset Management
6.2.6 Schroders
6.2.7 Goldman Sachs Asset Management
6.2.8 Amundi
6.2.9 PIMCO6.2.10 Impax Asset Management
*List Not Exhaustive
7. MARKET FUTURE TRENDS
8. DISCLAIMER AND ABOUT US
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