Global ESG assets surpassed $30trn in 2022 and are on track to surpass $40trn by 2030 to reach over 35% of projected $140trn assets under management, according to the latest ESG report from Bloomberg Intelligence (BI).

The report said the ESG market is set to mature and align with global regulation by the end of this decade. This is despite multiple macro economic challenges, a slowdown in growth and the ESG backlash. Given this outlook, BI said it expects enhanced scrutiny and regulations to bolster ESG asset credibility.

“While ESG has had a challenging few years, we see the market entering a necessary consolidation phase, characterised by slower growth and gaining maturity,” Adeline Diab, global ESG research and strategy director at BI, said.

“ESG assets are set to reach over $40trn by 2030 in line with our inaugural BI ESG Market Navigator study, which revealed investor appetite remains resilient with over 85% of asset managers planning to boost ESG AUM. Greater regulatory harmonisation in and across regions will also be essential to bolster credibility and sustain advances in ESG funds.

“BI’s 3.5% growth forecast is 70% below 2016 to 2020 rates as we expect the market to mature and gain credibility with rising scrutiny and regulation. This is following a previous surge, which also led to greenwashing risk and inconsistent ESG approaches.”

Forecasted ESG AUM by region

BI’s forecasts show Europe is set to remain the largest in ESG assets with over $18trn in 2030, preserving its 45% global share and CAGR keeping pace with the 3.5% global rate, dipping from 8% between 2014 and 2022.

The US may decelerate further to a 1.5% projected CAGR, resulting in $9.5trn in assets and a global share below 25% by 2030, as the upcoming elections, ESG backlash and high fund market concentration limit its growth potential.

In contrast, however, Japan, Canada and Australia will become fast-growing regions, led by Japan, where assets increased 50% to $4.3trn between 2020 and 2022. While they may continue to expand faster than the global rate, BI expects their CAGR to stabilise at 6% as regulation and rising scrutiny lead to market consolidation.

Diab added: “Outside of the US and Europe, Japan’s global share could exceed 15% by 2030, with nearly $7trn in assets, as a result of a supportive economic backdrop and government support. However, funds are likely to undergo a consolidation phase in the near term as the market adjusts to regulatory changes and client demand for differentiated products.”