Global ESG funds set to hit $34tn by 2026, says PwC
The global value of environmental, social and governance funds will surge to nearly $34tn by 2026 as investors look to profit from a transition to green energy, according to a new report.
Big investors are expected to increase their ESG-related assets under management (AuM) to US$33.9tn by 2026, up from US$18.4tn in 2021, according to a new report on the asset and wealth management by the ‘Big Four’ firm PwC.
ESG-oriented AuM is set to outpace the asset and wealth management market as a whole. PwC’s base-case growth scenario is expected to see European ESG assets up 53 per cent to $19.6tn.
PwC’s global asset & wealth management head Olwyn Alexander said ESG had become “perhaps the most powerful driver of growth in asset and wealth management”.
“The surge in demand for ESG investments highlighted in our survey exceeds almost all previous expectations,” she said.
“With the current economic headwinds, we have seen some correction in asset prices and there is a risk of significant contraction in capital markets that would result in a further decline.
“This underlines the importance for asset managers and institutional investors alike to understand how to capture the shift to ESG as a counter-balance to potential portfolio underperformance as well as legacy product obsolescence.”
The predicted rise in assets comes amid a reckoning for the ESG industry as regulators prepare to clampdown on the products globally and concerns grow over ‘greenwashing’.
The Financial Conduct Authority is preparing to clampdown on the labelling of ESG products to prevent firms from misleading promotion to investors.
Paul Clements-Hunt, who coined the acronym ESG in the early 2000s, told Morning Wire that asset managers labelling funds as ESG was often an easy win that did not reflect the underlying investment strategy.
“Marketing sustainability, green and ESG – however an asset manager wished to package it – was an easy win for asset gathering over a couple of years or more,” he said.
“But increasingly managers will be held to account as policy-makers, prudential oversight institutions and regulators seek to end a Klondike gold rush for easy assets.”