Global Environmental Social and Governance (ESG) Investing Market 2024–2033

Reports Description

As per the current market research conducted by CMI Team, the global Environmental Social and Governance  Investing Market is expected to record a CAGR of 9.4% from 2023 to 2032. In 2022, the market size is projected to reach a valuation of USD 17.2 Trillion. By 2032, the valuation is anticipated to reach USD 46.5 Trillion.

Global Coverage of Refinitiv Database

Source: According to International Monetary Fund

The ESG (Environmental, Social, and Governance) investing market involves investment strategies that consider companies’ sustainable practices, social impact, and corporate governance performance alongside financial returns. It seeks to align investor values with responsible and ethical investment choices, promoting positive environmental and social outcomes.

The nature of the ESG Investing Market is rooted in sustainability, social responsibility, and long-term value creation. It fosters a holistic approach to investing, emphasizing factors beyond financial metrics, thus influencing corporate behaviour and contributing to a more sustainable global economy. Key trends in the market include increasing demand for impact investing, ESG integration into investment decision-making, the rise of sustainable funds, and technology-driven advancements in ESG reporting and analysis.

Furthermore, regulations promoting sustainable finance and growing corporate focus on ESG practices are shaping the landscape of ESG investing.

Environmental Social and Governance (ESG) Investing Market – Significant Growth Factors

The Environmental Social and Governance (ESG) Investing Market presents significant growth opportunities due to several factors:

• Growing Investor Awareness: Increasing awareness of environmental and social issues has led to greater investor interest in aligning their investments with sustainable and responsible values, driving the demand for ESG-focused investment products.

• Regulatory Support: Supportive regulations and policies from governments and regulatory bodies encourage institutional investors and asset managers to integrate ESG factors into their investment strategies, fostering the growth of the ESG investing market.

• Corporate Sustainability Initiatives: Companies embracing sustainable practices and responsible governance attract ESG-focused investors, incentivizing businesses to enhance their ESG performance to meet investor demands.

• Financial Performance Considerations: Studies indicating that ESG-focused companies can achieve better financial performance and risk management attract investors seeking both positive impact and potential long-term returns, further driving the market.

• Innovation in Sustainable Financial Products: The development of innovative ESG-focused financial products, such as green bonds, social impact funds, and ESG-themed exchange-traded funds (ETFs), provides opportunities for investors to diversify their portfolios with sustainable options.

• Technology-Driven ESG Solutions: Advancements in technology, including data analytics and artificial intelligence, present opportunities for improved ESG reporting, risk assessment, and impact measurement, enhancing transparency and aiding informed investment decisions.

Environmental Social and Governance (ESG) Investing Market – Mergers and Acquisitions

The Environmental Social and Governance (ESG) Investing Market has seen several mergers and acquisitions in recent years, with companies seeking to expand their market presence and leverage synergies to improve their product offerings and profitability. Some notable examples of mergers and acquisitions in the Environmental Social and Governance (ESG) Investing Market include:

• BlackRock and Microsoft: In 2020, BlackRock the world’s largest asset manager, partnered with Microsoft to enhance its Aladdin investment management platform. The collaboration aimed to integrate artificial intelligence and data analytics to improve ESG data insights for investment decision-making.

• UBS and Climate Bonds Initiative: In 2018, UBS a prominent Swiss bank, teamed up with the Climate Bonds Initiative to support the development of the green bonds market. The partnership aimed to promote sustainable debt instruments and encourage green investments globally.

• MSCI’s Acquisition of Carbon Delta: In 2019, MSCI a global provider of investment decision support tools, acquired Carbon Delta, a climate risk analytics firm. The acquisition bolstered MSCI’s ESG research capabilities, enabling better climate-related risk assessment for investors.

• Morningstar’s Acquisition of Sustainalytics: In 2020, Morningstar a renowned investment research provider, acquired Sustainalytics to expand its ESG research and data capabilities. The acquisition facilitated the integration of Sustainalytics’ ESG ratings and analysis into Morningstar’s investment research platform.

These mergers and acquisitions have helped companies expand their product offerings, improve their market presence, and capitalize on growth opportunities in the Environmental Social and Governance (ESG) Investing Market. The trend is expected to continue as companies seek to gain a competitive edge in the market.

COMPARATIVE ANALYSIS OF THE RELATED MARKET

Environmental Social and Governance (ESG) Investing Market – Significant Threats

The Environmental Social and Governance (ESG) Investing Market faces several significant threats that could impact its growth and profitability in the future. Some of these threats include:

• Greenwashing and Lack of Standardization: Misleading or exaggerated ESG claims by some companies, known as greenwashing, pose a threat to the credibility of ESG investing. The lack of standardized ESG reporting and rating methodologies can make it challenging for investors to assess companies’ true sustainability practices.

• Data Quality and Availability: Incomplete or unreliable ESG data can hinder accurate risk assessment and impact analysis, leading to potentially flawed investment decisions. Limited data availability, especially in emerging markets, poses challenges for investors seeking comprehensive ESG insights.

• Short-Term Focus and Volatility: The ESG investing market may face short-term focus and volatility, particularly during economic downturns or market fluctuations. Investors shifting their focus away from long-term sustainability goals during crises may hinder the growth of ESG investments.

• Regulatory and Policy Changes: Changing regulations and policies related to ESG investing, both domestically and internationally, may impact the market’s growth and affect investment strategies. Uncertainty surrounding evolving regulatory frameworks can create challenges for market participants to navigate compliance and reporting requirements.

Report Scope

Category-Wise Insights

By Type:

• ESG Integration: ESG Integration involves considering environmental, social, and governance factors alongside financial analysis in traditional investment processes. It aims to identify companies with strong ESG practices and manage ESG risks while seeking financial returns. Asset managers and institutional investors are integrating ESG factors into portfolio construction, risk management, and engagement strategies, as they recognize the long-term value of companies with strong sustainability practices.

• Impact Investing: Impact Investing focuses on generating positive social or environmental outcomes alongside financial returns. Investors target projects and companies aligned with specific ESG goals to drive positive change. Trends in Impact Investing indicate a surge in investor interest as they seek measurable social and environmental benefits alongside financial returns.

• Sustainable Funds: Sustainable Funds, also known as ESG funds, invest in companies with strong ESG credentials. These funds aim to align investor values with sustainable and responsible investment choices. Sustainable Funds are witnessing significant growth as more investors prioritize ESG considerations. This trend has led to an expanding array of ESG-focused mutual funds and ETFs across various asset classes, providing investors with a diverse range of sustainable investment options.

• Green Bonds: Green Bonds are fixed-income financial instruments used to fund environmentally beneficial projects, such as renewable energy initiatives and sustainable infrastructure. Green Bonds are gaining popularity as governments, municipalities, and corporations embrace sustainable projects. The increasing issuance of green bonds is driven by investor demand for environmentally responsible investments and reflects a growing commitment to addressing climate and environmental challenges.

• Others: The “Others” category include the rise of social bonds, thematic investing, and investments aligned with specific UN Sustainable Development Goals. These trends indicate a diversification of ESG investment strategies, allowing investors to target specific social and environmental themes that align with their values and objectives.

By Application

• Environmental: ESG investing in the environmental application focuses on companies addressing climate change, resource conservation, renewable energy, and sustainable practices. Trends include increased investments in green technologies and companies with strong environmental stewardship, driven by growing awareness of climate-related risks and opportunities.

• Social: ESG investing in the social application targets companies promoting social welfare, diversity, labour practices, and community engagement. Trends show rising investments in companies prioritizing employee well-being, gender equality, and community development, reflecting investors’ increasing focus on societal impact.

• Governance: ESG investing in the governance application evaluates companies’ leadership, board structure, and ethical practices. Trends reveal growing demand for investments in companies with transparent governance structures and shareholder rights, driven by the emphasis on corporate accountability.

• Sustainable Development Goals (SDGs): ESG investing aligned with the United Nations’ SDGs aims to address global challenges like poverty, health, education, and climate action. Trends indicate rising interest in companies contributing to specific SDGs, as investors seek to align their investments with global sustainability goals.

Environmental Social and Governance (ESG) Investing Market – Regional Analysis

The Environmental Social and Governance (ESG) Investing Market is segmented into various regions, including North America, Europe, Asia-Pacific, and LAMEA. Here is a brief overview of each region:

• North America: In North America, the ESG Investing Market involves investment strategies that consider companies’ environmental, social, and governance practices alongside financial returns. The trend includes strong ESG integration, with asset managers incorporating ESG factors into mainstream investment decisions, driven by institutional demand and regulatory support. Dominating market players in this region include BlackRock, Inc., State Street Global Advisors (SSGA), and Vanguard Group, Inc., among others.

• Europe: In Europe, the ESG Investing Market is characterized by investments that prioritize environmental, social, and governance considerations, aligning with stringent EU regulations and standardized ESG disclosure requirements. The trend encompasses a thriving green bonds market and growing integration of ESG factors into institutional investment mandates. Dominating market players in Europe include Amundi Asset Management, Robeco Institutional Asset Management B.V., and BNP Paribas Asset Management, among others.

• Asia-Pacific: In the Asia-Pacific region, the ESG Investing Market is characterized by growing awareness of environmental and social issues, driving increased adoption of ESG investing in countries like Japan, Australia, and South Korea. The trend also showcases substantial investments in renewable energy projects in China and India, supported by government initiatives. Key market players in this region include Nomura Asset Management Co., Ltd., Mitsubishi UFJ Financial Group (MUFG), and Sumitomo Mitsui Trust Bank, Limited, among others.

• LAMEA (Latin America, Middle East, and Africa): In the LAMEA region, the ESG Investing Market is witnessing a growing focus on sustainable finance and ESG adoption by financial institutions, governments, and corporations. The trend includes increasing investments in renewable energy and infrastructure projects, aligned with sustainable development goals. Dominating market players in LAMEA include Investec Asset Management, Banco Santander S.A., and Franklin Templeton Investments, among others.

Competitive Landscape – Environmental Social and Governance (ESG) Investing Market

The Environmental Social and Governance (ESG) Investing Market is highly competitive, with a large number of manufacturers and retailers operating globally. Some of the key players in the market include:

• BlackRock Inc.
• State Street Global Advisors (SSGA)
• Vanguard Group Inc.
• UBS Group AG
• Robeco Institutional Asset Management B.V.
• BNP Paribas Asset Management
• Calvert Research and Management
• Amundi Asset Management
• Nuveen LLC
• PIMCO (Pacific Investment Management Company LLC)
• Others

These companies operate in the market through various strategies such as product innovation, mergers and acquisitions, and partnerships. For example,

New players entering the ESG Investing Market are leveraging innovation and development to make a mark. They embrace technology driven ESG reporting, advanced data analytics, and thematic investment strategies to differentiate themselves.

Meanwhile, key players dominating the market have established a strong presence through ESG integration, sustainable fund offerings, and shareholder engagement. They leverage their vast experience, reputation, and scale to attract institutional investors and drive market trends.

These dominating players also actively participate in shaping sustainable finance policies, setting industry standards, and collaborating with stakeholders to advance the ESG investing landscape.

The Environmental Social and Governance (ESG) Investing Market is segmented as follows:

By Type

• ESG Integration
• Impact Investing
• Sustainable Funds
• Green Bonds
• Others

By Application

• Environmental
• Social
• Governance
• Sustainable Development Goals (SDGs)

Regional Coverage:

North America

• U.S.
• Canada
• Mexico
• Rest of North America

Europe

• Germany
• France
• U.K.
• Italy
• Spain
• Rest of Europe

Asia Pacific

• China
• Japan
• India
• New Zealand
• Australia
• South Korea
• Rest of Asia Pacific

The Middle East & Africa

• Saudi Arabia
• UAE
• Egypt
• Kuwait
• South Africa
• Rest of the Middle East & Africa

Latin America

• Brazil
• Argentina
• Rest of Latin America