Sustainable assets under management (AUM) are set to reach USD35 trillion by 2030 despite rising anti-ESG sentiment, research from Bloomberg Intelligence reveals.
Amid what Bloomberg Intelligence’s director of research and chief ESG strategist, Adeline Diab, calls “a widening backlash” against sustainable investments, the predicted growth rates have been revised down from USD40 trillion.
However, Diab says the USD35 trillion forecasts demonstrates ESG’s “grit over rhetoric”.
“As the [sustainable investment] industry matures and enters an era of pragmatism we revised our previous USD40 trillion 2030 forecast, considering 85 per cent lower growth amid regulatory deadlocks, US market contraction and trade risks,” Diab says.
Diab predicts that 2025 will usher in a new “era of pragmatism” as the industry adapts to the economic risks and policy uncertainty around Donald Trump’s presidency which will impact investors’ appetite for ESG.
“ESG is poised for a fundamental shift in 2025, becoming more pragmatic to remain resilient amid widening backlash, weaker sentiment and a higher regulatory burden,” Diab says.
She adds that regulatory updates on ESG fund labeling are set to trigger increased rebranding by asset managers and may also dent near-term demand.
Later this year, the European Securities and Markets Authority is set to publish proposed revisions to Sustainability Finance Disclosure Regulation which is expected to replace Articles 6, 8 and 9 with specific fund categories.
And since May 2024, under the Financial Conduct Authority’s Sustainability Disclosure Requirements, firms operating in the UK need to ensure their sustainability references are “fair, clear and not misleading, and proportionate to the sustainability profile of the product and service”.
Looking at global ESG inflows this year, Bloomberg Intelligence expects a modest recovery, rising 12.5 per cent to USD45 billion,
ETFs look to fair especially well, maintaining their 40 per cent share of net inflows in 2025.
Diab says: “These funds may continue to attract global investors seeking US earnings growth and exposure to the market’s momentum. Our 2025 forecast also suggests that the share of flows in global, Europe and APAC-focused ESG ETFs will remain stable at 35 per cent, 15 per cent and 10 per cent, respectively.”
ETFs assets are set for a 10 per cent compound annual growth rate in the years to 2030, reaching USD1.3 trillion.
EU-listed funds will maintain dominance with a 70 per cent share based on resilient institutional demand.
Diab adds: “Strengthening regulatory frameworks including ESMA’s ESG fund naming rule and the SFDR review can mitigate greenwashing risks.”
However, she warns that should the ESG backlash persist and if regulators bring “confusion rather than clarity” ETF assets will remain flat at about USD750 billion.
