ESG (Environmental, Social, and Governance) investing has captured significant attention in recent years. Investors increasingly want to understand how the companies in their portfolios are creating positive global impact.
This push towards ESG investing has sparked hundreds of new funds and triggered a massive reallocation of investment capital worldwide. In this article, we’ll examine key ESG investing statistics that showcase the substantial impact ESG investing has achieved and where it’s headed next.
About ESG Investing
ESG stands for Environment, Social, and Governance. ESG investing serves as modern shorthand for impact investing—a strategy where investors channel their money into companies and assets that benefit the world.
ESG investments take many forms. Some target companies prioritizing carbon emission reductions, while others focus on organizations promoting workforce diversity. Still others simply exclude fossil fuel-related companies from otherwise traditional funds.
Notably, the US has few clear regulations defining what qualifies a company for ESG fund inclusion. The criteria for ESG investments remain largely at the discretion of fund managers and individual investors.
ESG Investing Statistics Highlights
- ESG investments are expanding globally – ESG investments have nearly doubled since 2016 and are projected to exceed $50 trillion by 2025.
- ESG investments demonstrate strong performance – Over half of ESG equity funds outperformed their category index during the past 5 years. Additionally, 63% of ESG initiatives delivered positive equity returns for individual companies.
- Europe dominates global ESG investing – Europe accounts for over 80% of ESG investment and maintains far stricter ESG reporting requirements than the US.
- ESG investing still has significant room for growth – Only 3% of 401(k) plans offer ESG investing options and just 34% of financial advisors recommend ESG investments.
1. ESG investments will be Worth $41 Trillion by the End of 2022
(Source: Bloomberg)
According to Bloomberg Intelligence, global ESG-related fund assets under management will reach $41 trillion—up from $22.8 trillion in 2016. Bloomberg Intelligence also projects that ESG-related investment will surpass $50 trillion by 2025.
2. There are 534 ESG Funds in the US Alone
(Source: Morningstar)
As of 2021, 534 registered ESG mutual funds and ETFs operated in the US alone. The number of ESG funds has nearly doubled since 2018, with 70% being actively managed funds.
3. 34% of Financial Advisors Recommend ESG Investments
(Source: Financial Planning Association)
A Financial Planning Association survey reveals that 34% of financial advisors recommend ESG investments to their clients—a slight decline from 38% in 2020.
Furthermore, 31% of advisors report receiving client inquiries about ESG investments in 2022, compared to 39% in 2020.
4. ESG Initiatives Produce Positive Returns
(Source: McKinsey)
McKinsey’s survey of 2,000 companies found that ESG propositions generated positive equity returns 63% of the time. These positive effects stem from ESG investments driving top-line growth, reducing costs (including regulatory and legal expenses), boosting employee productivity, and optimizing capital expenditures.
5. ESG Funds Have Outperformed Over the Past 5 Years
(Source: Morningstar)
ESG investments have delivered superior performance compared to non-ESG funds over the past five years. Morningstar data shows 57% of ESG equity funds beat their category index, while 63% outperformed over a 3-year timeframe.
6. 20 New Climate-focused Funds Launched in 2021
(Source: Morningstar)
Twenty new climate-focused funds launched in the US in 2021: 8 targeting climate solutions, 5 focused on clean energy technology, 4 on climate-conscious companies, and 3 on low-carbon organizations. This brings the total number of climate-focused funds in the US to 65.
7. There is Over $4 Trillion in “Sustainable Debt”
(Source: Bloomberg)
ESG funds extend beyond equity investing into fixed-income investing through “sustainable debt” funds. These funds invest in sustainability-linked corporate bonds and loans.
The sustainable debt market expanded to over $4 trillion in 2021, with investment inflows exceeding $1.6 trillion that year alone.
8. Millennials are Leading ESG Investments
(Source: CNBC)
A CNBC poll shows 33% of Millennial investors frequently or exclusively consider ESG factors when investing. In contrast, only 19% of Gen Z investors, 16% of Gen X investors, and just 2% of Baby Boomers factor ESG considerations into their investment decisions.
9. Europe is Leading the US in ESG Investment
(Source: CityWire)
Despite the US traditionally serving as the global investment hub, Europe leads ESG investing. Over 81% of total ESG investments are in Europe, while the US accounts for only 14%.
The European Union has also established much stricter environmental impact reporting requirements for companies, enabling fund managers and investors to make better-informed decisions about ESG portfolio composition.
10. Only 3% of 401(k) Plans Offer an ESG Option
(Source: Plan Sponsor Council of America)
Limited ESG availability may be constraining US ESG investment growth. According to a 2020 Plan Sponsor Council of America survey, only 3% of 401(k) plans include ESG investing options, with ESG investments comprising merely 0.1% of total retirement plan assets.
