According to a PwC Luxembourg poll released on Monday, more than two-thirds of European asset managers and distributors are considering delaying the launch or distribution of products that do not meet environmental, social, and governance (ESG) requirements.

Flows into ESG funds have increased in recent years, owing in part to a greater regulatory focus on topics such as climate change as governments strive to direct more funding toward initiatives that would help them fulfil their net-zero emissions targets.

According to a PwC study of 3,354 respondents, ESG assets domiciled in Europe could expand to between 7.4 trillion euros and 9.0 trillion euros ($7.8 to $9.5 trillion) by 2025, accounting for up to 56 per cent of total European mutual fund assets, up from 37% at the end of last year.

Against this backdrop, PwC found that nearly 72 per cent of European asset managers were willing to halt all non-ESG product launches, with more than 60 percent planning to do so by the end of 2024. The firm also predicted long-term challenges for asset managers who maintain a hybrid ESG/non-ESG product range as the shift occurs.

According to the survey, as many as 68 per cent of independent financial advisers, private and retail banks want to discontinue distribution of non-ESG products entirely, with more than half intending to do so over the next two years.

“As regional regulations become increasingly stringent and as efforts towards the development of global ESG standards intensify, managers – especially those willing to compete at a global level – will be pushed towards an all-encompassing alignment of their products and operations with ESG,” financial services market leader at PwC Olivier Carre said.

(Adapted from BusinessTimes.com.sg)

Categories: Economy & Finance, Regulations & Legal, Strategy, Sustainability