European assets in ESG strategies are set to reach €5.5 trillion ($6.4 trillion) to €7.6 trillion by 2025 in Europe, bolstered by investor demand and European regulations, according to a new report by PricewaterhouseCoopers Luxembourg.
The increase, from €1.66 trillion at the end of 2019, was forecast in a survey of 300 institutional investors and 200 money managers with $14.3 trillion in assets under management.
The survey also said European assets in European strategies are predicted to hit 41% to 57% of total mutual fund assets in Europe by 2025, up from 12.7% at the end of 2019.
Assets under management invested in ESG equity funds are set to increase to between €2.6 trillion and €3.6 trillion by 2025 from €866.3 billion, the report said.
ESG bond fund assets could reach €1.1 trillion to €1.6 trillion by the end of 2025, according to the report.
Europe's share of global ESG assets could represent between 71% and 74% by 2025, according to the report.
European institutional investors surveyed for the report, of which 37% were pension funds, expect to be moving away from non-ESG strategies by 2022. By 2022, many of the European Union's regulations are expected to be amended to include ESG factors.
Some 77% of investors surveyed by PwC plan to stop using non-ESG investment strategies in 2022. However, only 14% of money managers said they will stop offering non-ESG products by 2022.
"We expect that the asset and wealth management industry of tomorrow will be different from today, with ESG considerations becoming a standard for investing at a level playing field with the traditional financial yield standards," Olivier Carre, financial services market leader at PwC Luxembourg, said in a news release.
"As global capital becomes increasingly channeled towards sustainable projects, Europe is well positioned to act as the global ESG hub — creating new jobs and opportunities and thus enhancing the prosperity and future life quality of its population," he added.
The survey was conducted between March 20 and June 30.