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Sustainable investment driven by Europe: PLSA report

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Europe is driving the growth in sustainable investment with global assets under management in ESG-labelled funds passing USD2.8 trillion.

Figures from Morningstar Sustainalytics reveal a 14 per cent increase in assets over 2023, with European investors accounting for more that USD2 billion, with US and the rest of the world accounting for the remaining assets.

Speaking at the Pensions and Lifetime Savings Association conference, Catalina Secreteanu, head of ESG solutions at Morningstar, said regulation had been a major force in progressing ESG investing.

“Europe has been leading the way and regulation has played a role. In 2022, there were about 300 Climate funds launched in Europe, which is significant and compares with 220 in China and 100 in the US,” Secreteanu said.

Investors pointed out that anti-ESG sentiment in the US is hampering progress with some states implementing rules which prohibit fund managers from tendering for public pension fund mandates if their strategy includes a sustainable element.

Gerald Chen-Young, board trustee to the US National Public Pension Fund Association said: “Attitudes towards ESG in the United States are very different from those in Europe. There is clear evidence in states like Texas and Florida, where the government banned money management firms from even participating in RFPs or managing any public assets whatsoever. That hasn’t happened in Europe.”

Secreteanu said the anti-ESG movement, while relatively severe in the US, was not widespread nor likely to have a long-term impact.

“It has been demonstrated that running solely on an anti ESG platform has not been picked up sufficiently to be a reason for candidates to win an election. Anti-ESG sentiment will remain in certain pockets but there is the expectation that it will not emerge further on a national platform because it has been demonstrated that it doesn’t have enough bipartisan support,” she said.

However, she did note that the emergence of ‘green hushing’ where asset managers play down there ESG agenda for fear of alienating investors.

“We have to be familiar with the fact that asset managers continue to work in alignment with ESG strategies but may be less visible about that,” Secreteanu said.

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