A new report from PricewaterhouseCoopers (PwC) has found that the growth of ESG-related assets under management is set to outpace expected growth in overall asset and wealth management investments in the next several years.
In the October 10 report, PwC forecasted that ESG assets are on course to represent 21.5% of global assets under management within the next 5 years, with ESG-related assets under management in the U.S. expected to double from $4.5 trillion in 2021 to $10.5 trillion in 2026.
In compiling the report, PwC surveyed 250 institutional investors and asset managers with combined global assets of $60 trillion.
It found that 90% believe that integrating ESG into their investment strategy will improve overall returns, with the majority noting that ESG investments they had already made had higher performance yields than their non-ESG equivalents.
Olwyn Alexander, Global Asset & Wealth Management Leader, PwC Ireland, said, “ESG has become perhaps the most powerful driver of growth in asset and wealth management. The surge in demand for ESG investments highlighted in our survey exceeds almost all previous expectations.”
High demand is outstripping available supply according to the report, with 30% of investors reporting that they struggle to find “attractive and adequate ESG investment opportunities.” But rather than creating new ESG investment opportunities, the majority of asset managers surveyed said their immediate priority was converting existing products into ESG-oriented ones.
The report findings come despite the ongoing ESG pushback in a growing number of U.S. states, with Texas the most recent to implement an anti-ESG law.
The study cited key barriers to ESG investing to include complex and inconsistent regulation, along with the need for improved transparency on ESG products.