A report predicts demand for ESG funds will surge in the next five years, altering the investment landscape.
Entitled "The growth opportunity of the century", the report from PwC Luxembourg described ESG as representing a "paradigm shift", the largest fundamental change in the investment landscape since the introduction of exchange traded funds.
European ESG assets are forecast to reach between €5.5trn and €7.6trn in the next five years, making up 41% to 57% of total fund assets in the region. This compares to just over 15% of assets ESG accounted for at the end of last year, and would represent a "staggering" compound annual growth rate of 28.8%.
Olivier Carré, financial services market leader at PwC Luxembourg said: "As global capital becomes increasingly channelled towards sustainable projects, Europe is well positioned to act as the global ESG hub, creating new jobs and opportunities."
He added that ESG considerations will become standard when making investment decisions as this "once-in-a-century opportunity" takes shape, and Europe will be at the forefront of this movement. Currently, Europe accounts for 71% of global ESG assets and this is predicted to climb to 74% over the next five years.
"Public awareness of ESG-related risks, major regulatory change and institutional investors' preferences are rapidly pushing ESG investing to the top of the asset management agenda."
The study covered 200 asset managers, 300 institutional investors with European operations, and over 800 European retail investors, representing an estimated $14.3trn in assets under management (AUM).
Meanwhile, recent research from Campden Wealth, Global Impact Solutions Today (GIST), and Barclays Private Bank found that high net-worth investors plan to increase their allocation to impact investing from 20% of their portfolios in 2019 to 35% by 2025.