
Sustainable Investing: Shaping the future of finance
Key Messages
- Assets under management with an environmental, social and governance impact (ESG) mandate are growing exponentially.
- While sustainable investing has become a significant trend in the financial sector, there are some notable challenges ahead, including how to integrate sustainability considerations in passively managed portfolios tracking non-ESG indices and the lack of relevant capacities at financial institutions.
Sustainable investing has come a long way. It was not long ago when this new way of investing was still considered to be niche, at times confused with philanthropy. Over the years, financial market participants have gained a better understanding of the value proposition of incorporating ESG considerations in asset allocations and recognized the potential in the increasing client demand for values-based investing.
The heightened interest and pace of adoption by the financial industry is a powerful sign that the time for sustainable investing has arrived. Most financial professionals in developed countries have now become familiar with this investment approach and have shifted from asking “whether to do it” to “how to do it.”
By 2036, global assets worth USD 160 trillion are expected to be managed under some type of sustainable investing mandate. This would mean a close to 100% ESG integration in fund management. The report discusses potential drivers behind generating the level of demand needed from private and institutional investors to enable this exponential growth.
The report also covers some of the major trends that will shape sustainable investing in the years to come. Climate risk will certainly take centre stage in the financial industry. Even market participants who have not yet bought into the idea of sustainable investing are exploring how climate change would impact their portfolio companies.
The Sustainable Development Goals (SDGs) will also play an important role in providing guidance to the financial industry on what the most pressing global environmental and social challenges are and which areas investors should focus on when integrating ESG considerations into their portfolios.
Finally, innovative financial instruments will also be needed to address the world’s various sustainability challenges. Indeed, financial innovation in sustainable investing has been accelerating in recent years, trying to meet the diverse needs of investors and projects alike.
Participating experts
You might also be interested in
Guidebook on the Management and Financing of Soil Rehabilitation Projects in China
Drawing on best practices worldwide in funding environmental rehabilitation, this guidebook explores innovative design and the use of financial mechanisms to finance and manage soil remediation projects.
Boom and Bust: The fiscal implications of fossil fuel phase-out in six large emerging economies
Emerging economies need to plan for major reductions in fossil fuel revenues during the clean energy transition and find new sources of income.
Governments Must Live Up to Promises to Stop Funding Oil and Gas Internationally
At COP 26, 39 countries and public finance institutions signed the Glasgow Statement on International Public Support for the Clean Energy Transition. How can signatories get back on track to meet their commitments by the statement's 2022 deadline?
Countries could shift USD 28 billion/year from fossil fuels to clean energy
A new report shows Glasgow Statement signatories must urgently implement their COP 26 pledge to end new international public support for fossil fuels by the 2022 deadline.