Demand for ESG investment products is outstripping supply
11 October 2022 – Asset managers globally are expected to increase their ESG-related assets under management (AuM) to US$33.9tn by 2026, from US$18.4tn in 2021.
ESG assets are on pace to constitute 21.5% of total global AuM in less than 5 years. This represents a dramatic and continuing shift in the asset and wealth management (AWM) industry according to PwC’s Asset and Wealth Management Revolution 2022 report. The report also captures the views of 250 institutional investors and asset managers worldwide, representing nearly half of global AuM.
Scott Watson-Brown, PwC Bermuda Asset and Wealth Management Leader, said: “Our survey highlights a surge in demand for ESG funds that exceeds almost all previous expectations. Over the next two years, eight in 10 institutional investors plan to increase their allocations to ESG products. What’s more, nearly nine in 10 have either already rejected or stopped investing with a specific asset manager (39%) or would consider doing so (50%) due to shortcomings in the manager’s ESG investment strategies.
“The investor focus on ESG is transforming how value is defined and delivered within the asset and wealth management industry. The longer term winners will be those asset managers who differentiate their strategy and deliver on their purpose. Capturing the full potential of ESG demands a clear vision of what the business stands for, a strategy for change and a durable governance, accountability and reporting framework to make sure that what is promised in terms of ESG is in fact delivered.”
ESG AuM will outpace the broader AWM market, reaching US$10.5tn in the US and US$19.6tn in Europe by 2026
ESG investing is reporting higher performance yields, compared to non-ESG equivalents (according to 60% of institutional investors).
Demand for ESG investment products is outstripping supply with 30% of investors struggling to find attractive and adequate ESG investment opportunities.
Nearly nine in 10 of institutional investors surveyed believe asset managers should be more proactive in developing new ESG products.
Less than half of managers said they are planning to launch new ESG funds.
The majority of asset managers surveyed are seeking to convert their existing products so they can be labeled as ESG-oriented.
PwC’s Asset and Wealth Management Survey is a global survey of asset managers and institutional investors. The goal of the survey is to better understand how the current AWM industry views changes related to ESG and the direction in which that change is likely to take the industry in the future coming years.
The asset manager survey sample included 250 respondents, accounting for a total global AuM of approximately US$50 trillion. The respondent base was largely cross-sectional in terms of size and tranche.
The institutional investors survey consisted of 250 respondents, with combined global assets of US$60 trillion. Respondents covered a broad spectrum of AuM size, with more than half boasting assets of more than US$10 billion. Public pension funds and private pension funds together accounted for more than half of the institutional investor respondent base.
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