Sustainable investing is the number one growth opportunity for the asset management industry according to statistics from Dow Research, which forecasts the amount of ESG investments to double in the next three years.
By 2025, Dow Jones predicts these portfolios will account for 15% of all investments.
Based on a survey of 200 ‘financial leaders’ the research found the opportunity to drive positive change was the most widely-cited reason for this.
Fiduciary responsibilities and tightening regulations were the next most popular reasons identified by respondents.
Two-thirds, or 66%, of respondents, told Dow Jones they see ESG investing as the number one driver for sustained, long-term growth.
However, over half — or 56% — warned that traditional ways of valuing companies is inadequate for measuring sustainability.
As such, 52% warned that the current quality of ESG data was not yet sufficient to base investment decisions upon.
“Our research clearly shows a significant interest in sustainable investing in the years to come,” said Joe Cappitelli, general manager of Dow Jones Newswires.
“However, a large percentage of financial professionals are being met with opaque and outdated data sources when looking for a comprehensive view of companies’ ESG practices. That’s why trusted and timely ESG data and sentiment are imperative in helping investment managers capitalize on this burgeoning growth opportunity.”
Respondents pointed to ESG when discussing the importance of attracting future generations of investors.
According to the survey, 28% of sustainable investment inquiries come from those in Gen Z (anyone born between the late 1990s and early 2010s).
Conversely, only 16% of respondents are focusing on this demographic for growth.
Cappitelli added: “As we approach the greatest wealth transfer in history, financial leaders, marketers, and practitioners need to rethink their perceptions of this age group, and better understand their motivations and behaviors in order to earn their trust.”