Europe continues to lead the world in opportunities for environmental, social and governance, or ESG, investing.
That trend should continue owing to new European Union policies, according to experts.
More than 23 percent of $22.9 trillion (20.2 trillion/CHF22.9 trillion) of professionally managed assets worldwide are in Europe, according Morgan Stanley’s Sustainable Signals report. Around $12 trillion (€10.6 trillion/CHF10.6 trillion) of that sum is in Europe. Another $8.7 trillion (€7.68 trillion/CHF8.7 trillion) is in the United States. The rest is in Asia, Latin America and Africa. Those assets are growing at an annual compound growth rate of almost 12 percent.
The European Sustainable Investment Forum recently found that the best ESG opportunities in Europe amount to around $657 billion, with a compound annual growth rate of 20 percent.
The EU is now pursuing two policies that might boost that growth further, reported Brink.
First, the European Commission has launched an action plan on sustainable finance that includes a $23.7 billion (€21 billion/CHF23.7 billion) investment fund as well as new regulators to help classify and identify sustainable investing opportunities.
Second, the European Central Bank is evaluating a proposal to reduce minimum capital requirements for banks investing in ESG assets. Those investments theoretically benefit from the “green supporting factor,” or less risk because they are less susceptible to the setbacks of climate change.
But those efforts are part of a push to promote sustainable development that would come online by 2030 – a horizon that many investors might find attractive.
“Sustainability is part of Europe’s DNA,” said European Commission Vice-President for Jobs, Growth, Investment and Competitiveness Jyrki Katainen in a press release. “It is about making sure that future generations will have the same or better opportunities than us, whilst respecting the limited resources of our planet.”