Environmental, Social, and Governance (ESG) Investing Market – Trends Forecast Till 2031

Market Snapshot

Market Overview

The global Environmental, Social, and Governance (ESG) Investing Market size was estimated at USD 2,154,400 million in 2024 and is projected to reach USD 2,797,098.9 million in 2031 at a CAGR of 18.8 % during the forecast period 2025-2031.

Environmental, Social, and Governance (ESG) investing is a strategy that integrates non-financial factors, such as environmental sustainability, social responsibility, and ethical governance practices, into investment decisions. ESG investing goes beyond traditional financial metrics by considering the long-term impact of investments on the planet, society, and corporate governance structures. This approach aims to support companies that demonstrate a commitment to addressing global challenges like climate change, human rights, and business integrity, while also ensuring financial returns for investors.

The scope of ESG investing has expanded rapidly over the past decade, as more investors recognize the importance of aligning their portfolios with their personal values and the growing demand for corporate responsibility. ESG factors are increasingly being incorporated into investment portfolios across various asset classes, including equities, fixed income, and alternative investments. This expansion is driven by a combination of regulatory pressures, changing consumer preferences, and institutional commitments to sustainability, as well as growing evidence that companies with strong ESG practices tend to perform better financially over the long term.

Trends in ESG investing show an increase in the availability of ESG-focused investment products, including mutual funds, exchange-traded funds (ETFs), and sustainable investment indices. Another trend is the rise of impact investing, where investors specifically aim to generate measurable social or environmental impacts alongside financial returns. There is also a shift towards greater transparency and the standardization of ESG reporting, as investors demand more consistent and reliable data to assess the ESG performance of companies. This has led to increased collaboration between businesses, governments, and NGOs to create frameworks for responsible investing.

Several drivers are pushing the ESG investing market forward. Growing awareness of climate change, human rights issues, and income inequality has led to a demand for investments that contribute positively to these challenges. Additionally, an increasing number of studies have shown that companies with strong ESG practices often have better risk management and long-term profitability. Governments and regulators worldwide are also incentivizing ESG investments through policies such as tax breaks, green bonds, and stricter disclosure requirements, further driving the market's growth.

Impacts USA tariff rates on the ESG investing market

The tariff landscape can influence the cost structures of companies involved in ESG-related sectors, particularly those in manufacturing and renewable energy. Higher tariffs on imported goods or materials could impact the price competitiveness of sustainable products, such as electric vehicles or renewable energy technologies. However, the overall impact on ESG investments is nuanced, as the U.S. government also provides incentives for green and sustainable initiatives, which can offset some of the negative effects of tariffs

Delvens Industry Expert's Standpoint

Experts in the Environmental, Social, and Governance (ESG) Investing Market highlight several key trends driving growth and innovation. ESG investing focuses on integrating environmental, social, and governance factors into investment decisions, aiming to support companies that promote sustainability and ethical practices while ensuring financial returns. The market has expanded significantly due to growing awareness of climate change, human rights, and corporate responsibility, with trends including more ESG-focused investment products and an emphasis on transparency and standardized reporting. Drivers such as regulatory pressures, consumer demand for ethical products, and evidence linking strong ESG practices to better financial performance continue to propel the market. The U.S. tariff environment could impact ESG sectors, particularly those related to renewable energy and sustainable goods, as higher tariffs on imports may increase costs. However, government incentives for green technologies could mitigate some tariff effects, potentially supporting growth in ESG investments despite tariff-related challenges.

Analyst view on the impacts of U.S. tariff rates on the Environmental, Social, and Governance (ESG) Investing Market

ESG-related sectors may fluctuate, influenced by geopolitical dynamics and trade policies, but the overall impact on the ESG market is likely to remain relatively contained. With ongoing government support for green initiatives and renewable energy, any tariff increases could be offset by continued policy incentives. As ESG investing gains traction, tariff adjustments are expected to be less of a barrier to growth, especially for sectors like clean energy and electric vehicles, where long-term demand remains strong.

Market Portfolio

Key Findings

• The ESG integration segment leads the market as companies continue to adopt sustainability initiatives and improve their ESG practices in response to investor demands and regulatory pressures. As businesses enhance their ESG disclosures and performance, investors find it easier to incorporate ESG factors into their investment strategies. A strong corporate commitment to sustainability not only mitigates risks but also creates new opportunities for value creation, reinforcing the ESG integration segment with a more robust and dependable set of data for investment analysis.

• The green bonds segment is anticipated to grow rapidly in the coming years, driven by global collaboration and the development of international standards for green bonds. Organizations like the International Capital Market Association (ICMA) and the Climate Bonds Initiative (CBI) have established guidelines that ensure transparency and integrity in the green bond market. These standards facilitate cross-border investments, bolster investor confidence, and promote the scalability of green bonds, further fuelling market growth.

• Institutional investors dominate the market, with a keen focus on the long-term risks posed by environmental, social, and governance factors. Issues like climate change, resource scarcity, and regulatory changes can significantly affect financial performance. By incorporating ESG factors into their investment strategies, institutional investors can better manage these risks, safeguarding their portfolios. For example, investing in companies with strong environmental practices helps reduce exposure to regulatory fines and environmental liabilities.

• The retail investor segment is expected to grow significantly as user-friendly investment platforms and financial technology make ESG investing more accessible. Online brokerage firms and investment apps now offer ESG-focused funds and portfolios, making it easier for individuals to integrate ESG criteria into their investment plans. These platforms often include tools to evaluate the ESG performance of investments, making it simpler for retail investors to track and manage their ESG investments.

• The environmental segment leads the market as consumers increasingly favor products and services from companies committed to sustainability. This shift in consumer preferences drives businesses to adopt greener practices and develop sustainable products, creating more investment opportunities in these areas. Companies aligning with these trends are better positioned to capture market share and achieve long-term growth, making them more attractive to ESG investors.

• The integrated ESG segment is expected to experience rapid growth, driven by applications that combine ESG and financial data into a single platform. This integration allows investors to better assess the financial implications of ESG factors and make more strategic decisions. Advanced analytics and scenario planning tools within these applications help investors understand the long-term impacts of ESG factors on their investments, leading to more informed and forward-looking investment strategies.

• The market is also divided into various regions such as North America, Europe, Asia-Pacific, South America, and Middle East and Africa. North America region is projected to hold the largest market share. Factors such as Increasing Consumer Awareness, Regulatory Pressure, Demand for Sustainable Investment Products, Corporate Social Responsibility (CSR) Initiatives, Risk Management and Resilience, Institutional Investor Interest, Government Support and Policy Changes, ESG Integration into Investment Strategies, Investor Preferences for Ethical Practices, Financial Performance Correlation, Climate Change Awareness, Technological Advancements in ESG Data, Enhanced Transparency and Reporting, Millennials and Gen Z Focus on Sustainability, Global ESG Frameworks and Standards have triggered the Environmental, Social, and Governance (ESG) Investing Market in the region.

Regional Analysis

North America to Dominate the Market

• In North America, the Environmental, Social, and Governance (ESG) investing market is experiencing significant growth, driven by increasing awareness among investors and regulatory pressures. The region's large institutional investors, including pension funds and asset managers, are focusing more on ESG factors to align with both financial goals and ethical values. This shift is further encouraged by government regulations and commitments to sustainable growth, creating a fertile ground for ESG-oriented investment strategies. However, there are challenges such as inconsistent ESG reporting standards and varying regulations across states, which can create complexities in decision-making for investors.

• In Europe, ESG investing has gained considerable momentum, largely due to the European Union's robust regulatory framework aimed at promoting sustainability and responsible investing. The region’s investors are increasingly prioritizing ESG criteria, driven by both legislative measures and a cultural inclination toward sustainability. Europe's financial institutions and asset managers are more likely to integrate ESG factors into their investment decisions, further accelerated by the EU's Green Deal and Taxonomy regulations. This alignment with sustainable finance is resulting in a stronger demand for ESG-compliant assets, though challenges such as data transparency and greenwashing concerns remain prevalent.

• In Asia-Pacific, ESG investing is on the rise but at a slower pace compared to Western regions. The market is still evolving, with certain countries like Japan, Australia, and Singapore leading the charge due to their proactive approach toward climate action and sustainable finance. However, many countries in the region are still grappling with developing a comprehensive ESG framework, and there is a lack of standardized reporting mechanisms. This is causing hesitancy among investors, though awareness of ESG issues is gradually growing, especially in the corporate sector where there is increasing pressure to adopt more sustainable practices.

• In Latin America, ESG investing is emerging, but the market is relatively underdeveloped compared to other regions. Environmental challenges such as deforestation, water scarcity, and pollution are creating growing awareness around sustainability. However, the political and economic instability in some countries poses a challenge to the widespread adoption of ESG investing practices. Investors in this region are becoming more aware of the risks related to poor environmental practices and governance but are often hindered by the lack of regulatory frameworks, transparency, and consistent ESG metrics, which limit their ability to assess the long-term value of investments based on ESG criteria.

• In the Middle East and Africa, ESG investing is still in its nascent stages, although there are signs of growing interest, particularly in the Gulf Cooperation Council (GCC) countries. These nations are increasingly focusing on sustainable development to diversify their economies away from oil dependence, with initiatives like the Saudi Vision 2030 emphasizing environmental sustainability and governance. Despite these efforts, the region faces challenges such as a lack of mature ESG policies, insufficient awareness, and limited data availability. However, large-scale infrastructure projects and a push for greater environmental responsibility are slowly shaping the market for ESG investing in the region.

Competitive Landscape

• BlackRock
• BNP Paribas Asset Management
• Goldman Sachs Asset Management
• J.P. Morgan Asset Management
• Morgan Stanley Investment Management
• Northern Trust Asset Management
• PIMCO
• State Street Global Advisors
• UBS Group
• Vanguard Group

Recent Developments

• In June 2024, BlackRock, an asset management firm, introduced a series of climate transition-focused exchange-traded funds (ETFs) in Europe, while distancing itself from ESG investing in the U.S. The new iShares MSCI Climate Transition Aware UCITS ETFs, which are classified as Article 8 under the EU's Sustainable Finance Disclosure Regulation, are designed to give investors exposure to companies that are leading the shift toward a low-carbon economy.

• In October 2023, ClearBridge Investments and Franklin Templeton launched the FTGF ClearBridge Global Sustainability Improvers Fund, a new value equity fund. This innovative fund focuses on investing in companies that are actively working to improve their Environmental, Social, and Governance (ESG) practices, rather than solely targeting those with already strong ESG profiles.

Reasons to Acquire

• Increase your understanding of the market for identifying the most suitable strategies and decisions based on sales or revenue fluctuations in terms of volume and value, distribution chain analysis, market trends, and factors.
• Gain authentic and granular data access for the Environmental, Social, and Governance (ESG) Investing Market to understand the trends and the factors involved in changing market situations.
• Qualitative and quantitative data utilization to discover arrays of future growth from the market trends of leaders to market visionaries and then recognize the significant areas to compete in the future.
• In-depth analysis of the changing trends of the market by visualizing the historic and forecast year growth patterns.

Report Scope