PwC Luxembourg unveils new European ESG interactive dashboard

PwC Luxembourg today (27 June) launched a new interactive ESG dashboard dedicated to supporting European asset managers to expand their ESG operations and gain an accurate view of investor demand and market developments.

The dashboard consists of an interactive data tool, interactive report and raw data files - together providing comprehensive and granular insights into the ESG investing landscape and sentiment among European Institutional Investors (split by Pension Funds, Insurers, Endowments & Foundations and Family Offices), Individual Investors (split by Retail, Mass Affluent and (U)HNWI) and Distributors.

The tool is based on proprietary data gathered from a total of 3,354 respondents across eight European countries: UK, Switzerland, France, Netherlands, Germany, the Nordics, Spain and Italy.

Spanning over 1,000 pages and exhibits, this represents the most extensive and comprehensive study on Europe's fast-growing traditional ESG landscape to date. The respondents include 720 European Institutional Investors, 320 Distributors, 1,994 Individual Investors and 320 Asset Managers. 

Supplanted with an interactive report titled: The ESG Opportunity in Europe, the tool enables users to identify country- and investor-specific trends and developments, and allows Asset Managers, Owners and Distributors to benchmark themselves against their respective industry peers.

Key findings, trends and themes include the following:

Forecasts

• European-domiciled ESG assets are poised to reach between EUR 7.4tn and EUR 9.0tn by 2025, by when they will account for between 46% and 56% of total European Mutual Fund assets; up from 37% in end-2021.
• European-domiciled ESG ETF assets are poised to surge at a CAGR of between 33.3% and 43.0% CAGR, to reach between EUR 684bn and EUR 906bn by 2025. ESG Equity ETFs are set to significantly underpin this growth in both forecast scenarios, with total assets in this segment growing at a CAGR of between 33.6% and 43.2%.

Institutional Investors (Pension Funds, Insurers, Endowments & Foundations and Family Offices)

• European Institutional Investors are demonstrating increased willingness and readiness to absorb higher fees in order to unlock ESG's risk mitigation and value creation potential - with 71.9% of those surveyed being agreeable to paying a premium on ESG products.
• European Institutional Investors are set to significantly bolster their exposure to Article 8 products. While 42% of Investors currently allocate over 30% of their European AuM in Article 8 funds, this figure is set to increase to 68% in the coming 12-24 months.

Distributors (Private Banks, Retail Banks and IFAs)

• Almost 70% of European Distributors anticipate heightened Retail demand for Article 8 Equity Funds over the coming 12-24 months. 
• Further, as much as 68% are considering halting their distribution of non-ESG products altogether - of which over half are considering doing so within the coming two years. 
  Individual investors (Retail, Mass Affluent and (Ultra) High Net Worth Individuals)
• 67% of Retail, Mass Affluent and (Ultra) High Net Worth Investors are willing to pay an ESG premium.
• Further, 50.2% are considering halting their investments in non-ESG Funds. 

Asset Managers

• Almost 72% of surveyed European Asset Managers are considering halting their non-ESG product launches entirely, with over 60% aiming to do so by end-2024
• 76% plan to hold over 30% of their European AuM in Article 8 Funds within the coming two years - a notable jump from the 42% that currently do so. 

Dariush Yazdani - Global Asset and Wealth Management Research Centre Leader said: "As regulators and society increasingly urge investors to incorporate sustainability considerations within their investment policies and operations, managers will see a continued surge in demand for ESG products in the coming years.  

"Managers looking to seize the ESG opportunity should strive to holistically and consistently incorporating ESG across the board, viewing their entire operations through an ESG lens and adopt an all-encompassing approach to ESG, one that ranges from implementing sustainability into their product offering, all the way to assessing the sustainability metrics of their entire business structure."

Olivier Carré, financial services market leader said: "This report highlights a historic asset and sentiment shift within Europe's Investor bases, one which has seen ESG evolve from a ‘nice to have' for the most sustainability conscious investors to an all-encompassing paradigm shift across Europe's traditional investment landscape.

"Regulatory developments are a primary driver behind this growth and have led to the foundation for ESG standards to become increasingly extra-territorial. We are already seeing likely international regulation following the EU's example in this regard, particularly in light of mounting global political commitments towards tackling ESG and sustainability issues.

"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."