ESG Investing Market Size, Share, Growth, Trends 2024 to 2033

ESG Investing Market Size and Growth 2024 to 2033

The global ESG investing market size was valued at USD 25.67 trillion in 2023 and is expected to reach around USD 112.91 trillion by 2033, growing at a compound annual growth rate (CAGR) of 15.96% from 2024 to 2033.

ESG investing refers to the incorporation of environmental, social, and governance factors into investment decision-making processes. With this approach, one seeks to identify how well or poorly a company conducts its activities in relation to the natural environment, its social policy, and corporate governance. Investors applying ESG criteria aim to support enterprises that mirror their values and are, at the same time, more sustainable and responsible, believing such firms are most likely to be the long-term winners because they can actively manage risk and show far-reaching vision. This type of investment also does not aim solely for financial returns but seeks actively to contribute positively to social and environmental outcomes.

The ESG investing market has a focused initiative on integrating investment decisions together with ESG criteria into mainstream strategies of sustainability and ethical practice across various industries. These would range from financial products, such as ESG-themed mutual funds, ETFs, and green bonds, to services such as ESG rating assessments, portfolio management, and advisory services. In addition to this, some of the trends driving the market include increasing demand for SRI and the recognition of ESG factors as integral parts of long-term financial performance. Investors increasingly favor companies with strong ESG practices that appear more resilient and better equipped to manage risks associated with environmental and social issues.

• According to the United Nations Development Programme, assets invested in Asia-based sustainable funds have surged from just over US$10 billion in 2018 to more than US$100 billion in 2022, and China has become the world's largest green bond issuer. The Asia Investor Group on Climate Change said ESG investing is rapidly climbing in the region, which represents more than US$35 trillion in assets globally, though it remains well behind Europe and North America.
• IBEF reports that India has emerged pretty resilient to the current events happening globally, with as many as 11 sustainable investment funds launched in the year 2023. Of the launches, eight were actively managed funds and accounted for 96% of the total AUM for the category, with the largest fund accounting for 56% of the total AUM.

Report Highlights

• North America has accounted highest revenue share of 36.30% in 2023.
• Asia-Pacific has generated revenue share of around 23.40% in 2023.
• By application, the environmental sustainability segment has accounted revenue share of 25.10% in 2023.
• By type, the ESG integration segment has generated revenue share of 34% in 2023.

ESG Investing Market Growth Factors

• Increased awareness of responsible investment practices: Investors and stakeholders are taking responsibility for considering ESG criteria as a nice-to-have element in investment decision-making. This is propped by the increasing awareness that responsible practices will yield long-term financial stability and risk mitigation, hence driving more capital into ESG-compliant assets.
• Improvement in ESG Data and Analytics: Development regarding advanced tools and platforms of collecting, analytics, and reporting on ESG data has improved the level of efficiency on the side of investors toward making prudent decisions. Such technological advancements have ensured ease in analyzing the ESG performance of companies and further integrating this information into their investment strategies, thus fostering market growth.
• Regulation and Government Policy: Most governments in the world are enacting regulations and policies that create a favorable environment for ESG investing. It includes, among others, the mandatory disclosure of ESG, green finance initiatives, and tax incentives for sustainable investments. These regulatory frameworks encourage more investors to use ESG principles in their investment decisions, thus widening the market.
• Demand for Corporate Transparency: Conventions have placed greater demands on the stakeholders with respect to the accountability and transparency of ESG practices from companies. The pressure has resulted in better reporting standards, greater emphasis on ESG factors in corporate strategies, and thus more ESG-focused investments.
• Institutional Investor Influence: The influence of large institutional investors in pension funds, insurance companies, and sovereign wealth funds is driving ESG investing. Currently, the large-scale capital allocation of such investors into ESG-compliant assets influences the wider investment community through the setting of wider industry standards and further market growth.

ESG Investing Market Trends

• Integration of ESG Criteria into Mainstream Investing: ESG factors have transitioned from being niche considerations to essential components of mainstream investment strategies. Asset managers are increasingly integrating ESG metrics into their traditional financial analysis, which helps in better assessing risks and identifying opportunities. This shift reflects the growing recognition of ESG's impact on long-term financial performance.
• Growth of Thematic and Impact Investing: Investors are increasingly drawn to thematic investing, focusing on specific ESG themes like renewable energy, social equity, and corporate governance. Impact investing, which aims to achieve measurable social and environmental outcomes alongside financial returns, is also gaining momentum. This trend reflects a broader interest in aligning investments with personal values and societal goals.
• Increased Focus on Climate Risk: Climate change has emerged as a critical driver for ESG investments. Investors are actively seeking to mitigate climate-related risks in their portfolios by investing in companies with strong environmental practices and divesting from carbon-intensive industries. This focus on climate risk underscores the urgency of addressing environmental challenges through sustainable investments.
• Expansion of ESG Products: The variety of ESG investment products has grown significantly, including options such as mutual funds, ETFs, bonds, and private equity investments. This expansion provides investors with a broader range of ESG-compliant options, allowing them to align their investments with their financial goals and risk tolerance while supporting sustainable practices.
• Rise of Shareholder Activism: Shareholders are increasingly using their influence to push for greater corporate accountability on ESG issues. This activism is driving companies to adopt more sustainable and socially responsible practices, as shareholder votes and campaigns are now a powerful force in shaping corporate governance and sustainability efforts.

Report Scope

ESG Investing Market Dynamics

Drivers

Increased Funding and Investment

• The ESG Investing Market is benefiting from increased funding from both public and private sectors. Governments are supporting sustainable finance initiatives, while private investors and venture capitalists are recognizing the potential of ESG investments, leading to significant financial backing.

Corporate Accountability and Risk Management

• Companies are increasingly aware that strong ESG performance can lead to better risk management and long-term financial success. This understanding is driving businesses to improve their ESG practices, thereby attracting more investment.

Restraints

Economic Volatility

• Market fluctuations and economic downturns can impact the flow of capital into ESG investments. Additionally, the high costs associated with ESG compliance and reporting can be a deterrent for some companies, limiting the market's growth potential.

Challenges in ESG Reporting and Standardization

• The lack of standardized ESG reporting frameworks and metrics can create challenges for investors trying to compare and assess ESG performance across companies and industries. This inconsistency can hinder the widespread adoption of ESG investing.

Opportunities

Emerging Technologies

• The use of emerging technologies such as artificial intelligence, big data, and blockchain in ESG data collection and analysis presents significant opportunities for market growth. These technologies can enhance transparency, accuracy, and efficiency in ESG reporting, making it easier for investors to integrate ESG factors into their decision-making processes.

Education and Awareness Campaigns

• Increasing global awareness and education about the benefits of ESG investing can expand the market. Public campaigns, industry conferences, and educational programs can help demystify ESG investing for a broader audience, driving more participation from both individual and institutional investors.

Challenges

Supply Chain Disruptions

• The ESG Investing Market faces challenges related to supply chain disruptions, particularly in industries dependent on global supply chains. These disruptions can affect the availability and cost of ESG-compliant products and services, posing a challenge for investors and companies alike.

Skill Gaps in ESG Expertise

• There is a growing demand for professionals with expertise in ESG analysis and reporting. However, the shortage of skilled labor in this area can limit the capacity of firms to effectively implement and manage ESG strategies, which could hinder market growth.

ESG Investing Market Segment Analysis

Investment Analysis

Equity Investments: ESG equity investments focus on purchasing shares in companies that demonstrate strong environmental, social, and governance practices. These investments typically target companies with sustainable business models and ethical governance structures, offering potential long-term growth by aligning with ESG criteria. Investors are increasingly drawn to these investments as they seek to balance financial returns with positive social and environmental impact.

Fixed Income Investments: ESG-focused fixed-income investments involve purchasing bonds from issuers that meet specific ESG standards. This includes green bonds, social bonds, and sustainability-linked bonds, which finance projects with positive environmental or social outcomes. These bonds provide investors with a more secure investment option while supporting initiatives that promote sustainability and responsible governance.

Private Equity and Venture Capital: In the ESG space, private equity and venture capital investments support companies at various stages of growth that prioritize ESG factors. These investments often focus on innovative solutions to social, environmental, and governance challenges, offering the potential for significant impact alongside financial returns. Investors in this segment are increasingly seeking opportunities to back companies that drive positive change.

Thematic and Impact Investments: Thematic and impact investments focus on specific ESG themes, such as renewable energy, social equity, or corporate governance. Impact investing, in particular, aims to generate measurable social and environmental benefits alongside financial returns. These types of investments are gaining traction as investors look for ways to align their portfolios with their values and contribute to global sustainability efforts

Service Analysis

Asset Management Services: These services involve the management of portfolios that are aligned with ESG criteria, offering investors strategies that integrate environmental, social, and governance factors into the investment process. Asset managers provide clients with opportunities to invest in companies that meet specific ESG standards, helping to manage risks and identify opportunities linked to sustainability.

Advisory Services: ESG advisory services guide investors in understanding and implementing ESG strategies, including risk assessment, sustainability reporting, and portfolio alignment with ESG goals. These services are crucial for institutional investors, corporations, and individuals looking to develop tailored ESG investment strategies that align with their objectives and regulatory requirements

Research and Data Analytics: Providers of ESG research and data analytics offer crucial services that help investors evaluate companies based on their ESG performance. These services rely on data-driven insights to inform investment decisions, making it easier for investors to compare ESG metrics across industries and ensure transparency in their portfolios.

ESG Reporting and Certification: This segment includes services that assist companies in reporting their ESG performance and obtaining certifications like B Corp, LEED, or other sustainability ratings. These services are essential for improving ESG transparency, attracting ESG-focused investors, and ensuring that companies meet industry standards for sustainable practices

Application Analysis

Corporate Governance: ESG investing in corporate governance focuses on companies with strong leadership, board diversity, transparency, and accountability. Investors seek out companies that demonstrate ethical governance practices, which are crucial in reducing risks associated with poor management and fostering long-term stability.

Environmental Sustainability: Investments targeting environmental sustainability focus on companies that prioritize reducing their environmental impact, such as those in renewable energy, waste management, and conservation. These investments support the global shift towards sustainable business practices and help mitigate environmental risks.

Social Responsibility: ESG investments in social responsibility focus on companies that contribute positively to society, through practices like fair labor, diversity, and community engagement. These investments aim to support businesses that uphold high ethical standards and contribute to social well-being, enhancing corporate reputation and long-term value.

Climate Change Mitigation: This application involves investing in companies that are actively working to combat climate change. Investors in this segment focus on businesses that reduce carbon emissions, develop clean energy solutions, or enhance climate resilience, aligning their portfolios with global efforts to address climate-related challenges.

End User Analysis

Institutional Investors: Large entities such as pension funds, insurance companies, and sovereign wealth funds are major players in the ESG investing market. These investors incorporate ESG factors into their strategies to manage risks and enhance long-term returns, often using their significant capital to influence corporate behavior.

Individual Investors: Retail investors are increasingly drawn to ESG investing as awareness of sustainability issues grows. These investors seek to align their financial goals with their values by choosing ESG-focused mutual funds, ETFs, or robo-advisors that offer exposure to socially responsible companies.

Corporations: Companies participate in the ESG investing market by adopting corporate sustainability programs, issuing green bonds, and linking executive compensation to ESG performance. These initiatives help companies attract ESG-conscious investors and improve their reputation in the market.

Non-Profit Organizations: Non-profits, including foundations and endowments, are adopting ESG investing strategies to align their investments with their missions. These organizations prioritize investments that generate positive social or environmental outcomes, balancing financial returns with their broader goals for societal impact.

ESG Investing Market Regional Analysis

Why is North America leads the ESG investing market?

The NOrth America ESG investing market size was estimated at USD 9.32 trillion in 2023 and is expected to hit around USD 40.99 trillion by 2033. The North America leading the market, due to its strong financial sector and growing awareness of environmental, social, and governance issues among investors. The U.S. and Canada are at the forefront of integrating ESG factors into mainstream investment strategies, driven by increasing regulatory pressures and the rising demand for sustainable investment options. Significant capital inflows into ESG funds, coupled with the growth of shareholder activism and the expansion of green bond markets, contribute to the region's dominance in the ESG investing landscape.

Europe hit substantial growth in the ESG investing market

The Europe ESG investing market size was estimated at USD 7.62 trillion in 2023 and is projected to surpass around USD 33.53 trillion by 2033. Europe region is characterized by its stringent regulatory framework and strong investor commitment to sustainability. The region has seen substantial growth due to the implementation of the EU Taxonomy and the Sustainable Finance Disclosure Regulation (SFDR), which encourage transparency and accountability in ESG investments. Countries like Germany, the UK, and France are leading the way in adopting ESG principles across various asset classes. The region's focus on reducing carbon emissions, promoting social equity, and enhancing corporate governance drives continued market expansion.

Why is Asia-Pacific experiencing rapid growth in the ESG investing market?

The Asia-Pacific ESG investing market size was valued at USD 6.01 trillion in 2023 and is expected to reach around USD 26.42 trillion by 2033. The Asia-Pacific region is expanding rapid growth in the market, fueled by increasing investor interest in sustainability and government initiatives promoting green finance. Countries such as Japan, China, and India are witnessing significant expansion in ESG-related investments, supported by rising awareness of climate risks and social issues. The region's growth is further bolstered by the development of sustainable finance frameworks and the launch of ESG-focused funds, which cater to the growing demand for responsible investment options.

LAMEA hit an expansion in the ESG investing market

The global ESG investing market size was valued at USD 2.72 trillion in 2023 and is expected to reach around USD 11.97 trillion by 2033. The LAMEA region is seeing an expansion in the market, driven by improving economic conditions and growing awareness of sustainability issues. In Latin America, there is an increasing focus on responsible investing as a means to address social inequalities and environmental challenges. The Middle East is benefiting from substantial investments in renewable energy projects and sustainable infrastructure, while Africa is gradually gaining attention from global investors interested in impact investing and social development initiatives. Despite challenges such as limited resources and regulatory complexities, the region is making progress through international partnerships and funding aimed at enhancing ESG integration.

ESG Investing Market Top Companies

• BlackRock, Inc.
• Vanguard Group, Inc.
• State Street Global Advisors
• JPMorgan Chase & Co.
• Goldman Sachs Asset Management
• Morgan Stanley Investment Management
• UBS Asset Management
• Amundi Asset Management
• AXA Investment Managers
• BNP Paribas Asset Management
• Legal & General Investment Management
• Allianz Global Investors
• PIMCO (Pacific Investment Management Company)
• Schroders plc
• Fidelity International

Among the emerging players, Ethic Inc. leverages cutting-edge technology to provide personalized, data-driven ESG investing solutions, helping investors align their portfolios with their values. Aspiration focuses on sustainable banking and investment products, emphasizing environmental and social impact while offering competitive financial returns. Leading players like BlackRock, Inc. continue to dominate the market through their extensive ESG product lines and strategic initiatives, such as incorporating climate risk into their investment processes.

MSCI Inc. plays a crucial role in the market by providing ESG ratings and analytics that help investors make informed decisions. Innovations and collaborations, such as Ethic’s partnership with large financial institutions and MSCI’s continuous enhancement of its ESG data offerings, underscore their leadership in the evolving ESG Investing Market.

CEO Statements

Here are some recent CEO statements from key players in the ESG investing market:

Larry Fink, CEO of BlackRock, Inc.

• "At BlackRock, we are committed to integrating sustainability into our investment approach. We believe that sustainable investing is the strongest foundation for client portfolios going forward. Our focus on ESG is not just about doing the right thing; it's about driving better returns and ensuring long-term value for our investors."

David Solomon, CEO of Goldman Sachs

• "Sustainability is a core part of our strategy at Goldman Sachs. We believe that incorporating ESG factors into our investment decisions is crucial for achieving sustainable growth. Our goal is to drive positive change through our financial services, helping to build a more resilient and inclusive global economy."

Recent Developments

Key players in the ESG investing market plays a crucial role in promoting sustainable practices across industries. Companies in this market integrate environmental, social, and governance (ESG) factors into their investment strategies and drive innovation to support global sustainability goals. Some notable examples of key developments in the market include:

• In August 2024, JERA Nex expanded its presence in the U.S. renewable energy market by acquiring a 395 MW solar project. This strategic move highlights the company's commitment to growing its renewable energy portfolio and supporting the transition to sustainable energy sources.
• In July 2024, Terex Corporation announced the acquisition of ESG for $2 billion, a strategic move to expand its market reach and strengthen its position in the rapidly growing ESG sector.
• In July 2024, co-working spaces increased their investments in ESG initiatives to meet rising demand and command higher rentals. This trend reflects the growing importance of sustainability in the real estate sector, as businesses and tenants prioritize environmentally and socially responsible spaces.
• In January 2024, two leading ESG-focused businesses have merged to form Holtara, aiming to enhance their services in private markets and provide comprehensive ESG solutions, reflecting the growing demand for sustainable investment practices and the importance of ESG integration in private equity.

Market Segmentation

By Type

• ESG Integration
• Impact Investing
• Sustainable Funds
• Green Bonds
• Others

By Investment

• Equity Investments
• Fixed Income Investments
• Private Equity and Venture Capital
• Thematic and Impact Investments

By Services

• Asset Management Services
• Advisory Services
• Research and Data Analytics
• ESG Reporting and Certification

By Application

• Corporate Governance
• Environmental Sustainability
• Social Responsibility
• Climate Change Mitigation

By End User

• Institutional Investors
• Individual Investors
• Corporations
• Non-Profit Organizations

By Regions 

• North America
• Europe
• APAC
• LAMEA