ESG (Environmental, Social and Governance) in Wealth Management - Thematic Research
Summary
Drawing on GlobalData’s 2021 Global Wealth Managers Survey, this report explores the current state of ESG adoption in the wealth management space and analyzes the key trends that are expected to shape the sector going forward.
Environmental, social, and governance (ESG) is no longer just a buzzword. The theme is having a major impact on the broader financial services industry - particularly the wealth management sector. Globally, HNW investors allocate an average of 26% of their financial assets to ESG investment products. However, there are strong differences between wealth managers’ ESG commitments. According to GlobalData’s 2021 Global Wealth Managers Survey, 51% of wealth managers in the HNW space have an ESG proposition; this proportion jumps as high as 87% in the UK but falls to as little as 23% in New Zealand.
Scope
- 82% of wealth managers expect the proportion of financial client assets allocated to ESG investments to increase over the next 12 months.
- HNW investors opt for ESG investments for a multitude of reasons. However, return on investment considerations are the number one driver.
- Younger generations are more open to ESG investments. Using the UK as an example, 75% of consumers in their 20s regard sustainable investing as “very important” or “somewhat important.”
- HNW investors expect a sophisticated ESG proposition. Globally, 73% of wealth managers agree that HNW investors expect ESG products that apply positive as opposed to negative screening strategies.
- Learn about the size of the ESG market and understand HNW demand patterns across countries.
- Understand how HNW investors’ and retail investors’ attitudes towards ESG differ.
- Learn about product preferences in the ESG space.
- Learn about current compliance issues and the growing relevance of greenwashing, as well as the impact these factors will have on wealth managers.
- Understand what your competitors are doing in the ESG space via different case studies.
- Market Size and Demand Patterns
- ESG has a major impact on the financial services industry
- Global sustainable fund assets totaled $2.8 trillion at the end of Q1 2022
- Demand for ESG investments is particularly pronounced in the US, the UK, and China
- China has overtaken the US as the second-largest climate funds market
- Established players have been expanding their ESG capabilities via acquisitions
- Attitudes and Product Preferences
- A belief that ESG investments yield better returns drives uptake in the HNW space
- Education is critical to address misconceptions surrounding ESG ROI among millennials and non-HNW investors
- Younger generations are more open to ESG investments
- HNW demand for ESG now outstrips demand for philanthropy
- More ESG-compliant crypto products will hit the market as investor demand for sustainable options rises
- Demand for equities dominates in the ESG space
- Alternatives are turning sustainable
- Greenwashing and Compliance
- Greenwashing is a growing threat to wealth managers' reputations
- Governments across the world are scrambling to introduce ESG standards
- There will be more ESG-related scandals as regulatory pressure increases
- The Russia/Ukraine conflict is driving further ESG awareness
- Competitive Dynamics
- Pressure from customers is forcing providers to review their ESG propositions
- Only 1% of financial services providers believe they have not reaped any benefits from their environmental sustainability efforts
- Traditional players and newcomers are shifting their focus towards ESG
- There are notable differences between providers' ESG propositions
- UBS's multifaceted ESG efforts serve as a best practice case
- Goldman Sachs has pledged to deploy $750 billion to sustainable causes
- Wealthfront is one among many robo-advisors offering ESG portfolios
- Key takeaways
- Appendix
- GlobalData's ESG framework
- Secondary sources
- About GlobalData
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