ESG assets are set to hit $50trn (£36.5trn) by 2025, more than a third of the projected $140.5trn in total global assets, according to Bloomberg Intelligence (BI).
BI’s latest ESG 2021 Midyear Outlook report found ESG exchange traded funds (ETFs) were set to reach $1trn, and the ESG debt market could hit $11trn by 2025.
The analysis comes amid a period of acceleration for green bonds in corporate and government markets. In March, Italy launched Europe’s largest green bond debut, priced at €8.5bn.
In 2020, ESG assets exceeded $35trn, up from $30.6trn in 2018 and $22.8trn in 2016, culminating in a third of total global AUM, according to the Global Sustainable Investment Alliance.
BI predicts that with 15% growth, half the pace of the past five years, ESG assets could surpass $50trn by 2025.
“The pandemic and the global race to net zero carbon emissions have put ESG criteria into orbit – from niche to mainstream to mandatory,” said Bloomberg Intelligence head of ESG and thematic investing EMEA & APAC Adeline Diab.
“ESG is fundamentally reshaping the financial industry, becoming part of financial reporting. This is in part due to mounting scrutiny from regulators, markets being more sensitive to ESG-related news, and asset owners appointing managers on the basis of ESG across asset classes.”
“While Europe has historically led on ESG assets, the US has seen over 40% growth over the past two years and now accounts for $17trn, so nearly half of the global $35trn ESG assets under management,” added Diab.
“Europe’s ESG product landscape may serve as a barometer for what to expect globally. The region’s ESG mutual funds and ETFs accounted for circa 25% of all European products in 2020.”
The report also found flows into ESG ETFs are on track to exceed the projected $115bn mark in 2021, as 65% of inflows have already been recorded in H1. February was the month with the highest inflows of $20.5bn, beating the previous largest inflow in November 2020 of $13bn.
BI said it expects ESG ETF growth to stand at 35% per annum, and thus reach $1trn by 2025.
“ESG ETF cumulative assets reached around $225bn in 2020 accounting for almost 15% of global ETF asset growth that year. Though Europe has dominated ESG ETFs, US products have supported the next wave of organic expansion,” said Diab.
