Sustainable investing levels will increase at an accelerated speed, although sustainable fund market could shrink – finds Insider Intelligence
Insider Intelligence forecasts that sustainable (ESG) investing will remain a high priority for investors, asset managers, and banks in 2023, despite regulatory pressures and intense competition.
To begin with, all market stakeholders are increasingly interested in sustainable practices. Thus, over 80% of institutional investors in the US and Europe plan to increase their funding of ESG products over the next two years. Meanwhile, both employees and consumers are paying attention to corporate ESG practices. For instance, a quarter of respondents to the Kearney survey would leave their bank over poor environmental and social track records.
It is no wonder that institutional investors and money management firms place trillions of dollars into sustainable projects. In addition, about two-fifths (41%) of banking executives globally believe ESG investments are connected to their greatest opportunities. Out of all eco-related issues, climate change and carbon emissions remain top priorities.
Considering the deadline for net-zero goals is getting nearer, sustainable investing shall remain a priority and drive growth at least through 2025.
Scrutiny of sustainable investing
At the same time, fears of being accused of greenwashing will force banks and FIs to be increasingly careful about their “green” investments. In addition, businesses would be more cautious with their carbon offsetting practices.
Stronger scrutiny of ESG funding and practices is also expected from regulators. That would mean the total number of ESG products on the market could decrease despite rising demand.
Thus, the EU has finalised its ESG investing rulebook this year, although further clarifications may be needed. Meanwhile, both UK and the US consider new ESG guidelines scheduled for 2023.
Due to the stricter classifications adopted, asset managers are pressured to rethink what constitutes ESG investment. That’s the reason for the sharp drop in ESG AuM we witness this year.