Dedicated sustainable investing assets could reach $13 trillion globally by 2025, according to a paper released Thursday by asset management consultant Casey Quirk, a practice of Deloitte Consulting.
That would be more than four times the total at the end of 2020. It includes $3.2 trillion of new money, $5.6 trillion of strategy conversions and $1.3 trillion of market appreciation.
The estimated $13 trillion would represent about 12% of total assets under management by 2025, compared with 3.4% by the end of 2020.
The growth will be prompted by retail investor demand, increased sustainability disclosure and market regulation, and widespread adoption by institutional asset owners and financial intermediaries, said the authors of "It's Not Easy Being Green: Managing authentic transformation within sustainable investing," in their research.
"The opportunity is there for active management to capture market share from indexed strategies and reap considerable economic rewards if firm leaders can commit and execute on plans to retool with credible sustainable investing processes," said co-author Alyssa Buttermark, manager and lead ESG analyst for Casey Quirk, in a news release.
Yet despite the "massive opportunity," said Casey Quirk principal and co-author Benjamin F. Phillips, "we believe many asset managers are still unprepared for this broad and long-term shift in investor preferences, especially U.S.-domiciled firms."
Casey Quirk defines dedicated sustainable investing as a subset of ESG investing strategies and only includes strategies with a primary investment objective to positively promote sustainability, such as positive tilt, alignment with Sustainable Development Goals and impact investments.
The paper shows Europe in the forefront and Europe, the Middle East and Africa, known as EMEA, likely to make up almost three-fourths of sustainable investing assets by 2025. That would be $9.5 trillion, compared with $2.2 trillion at the end of 2020. The rest would be $2.5 trillion for the U.S. and $1 trillion for the Asia-Pacific region, compared with $400 billion and $200 billion, respectively, in 2020.
Broken down by projections for the $3.2 trillion of new money by 2025, $1.8 trillion will be in EMEA, $1 trillion in the U.S., and $400 billion in APAC.