The growth of environment, social and governance (ESG) investing is an unstoppable trend around the world. The total assets under management for ESG-related investments exceeded USD 35 trillion by the end of 2020. In other words, for every 10 dollars of professionally managed assets in the world, more than three dollars are ESG-related. The ESG market has grown significantly by 53.5%¹ compared to 2016. It is estimated that the size of the ESG investment market will surge to more than USD 50 trillion² by 2025 and make up the majority of investments globally.

Allianz Global Investors (“AllianzGI”) has long been a pioneer in ESG investing. As of 30 September 2021, AllianzGI managed EUR 136 billion in sustainable assets. Interestingly, ESG investing is not a concept that was born out of nowhere. As early as 2004, it was mentioned in a report by the United Nations³ and is in line with earlier concepts such as “Corporate Social Responsibility”; but ESG investing was not on investors’ radars at that time. So, why has ESG investing experienced such astonishing growth in recent years? Climate issues and the shift in investors’ mentality are the key for understanding why.

Economic Development Should Not Sacrifice the Environment and Society

In recent years, extreme weather has ravaged the world. Coupled with the COVID-19 pandemic, people have started to realise that economic development should no longer be at the expense of the environment and society. To secure long-term growth, corporates should change their mindset from “maximizing the value for shareholders” to “protecting the interests of stakeholders”. On top of traditional financial analysis, investors should never underestimate the importance of non-financial factors, such as environmental protection, social responsibility and corporate governance, which are closely linked with corporates’ risk tolerance, financial situation, performance and valuation.

ESG factors are the key driver for the development of more robust and forward-looking global financial markets. Investing strategies that incorporate ESG factors can reduce risks and increase potential returns. Looking to the future, ESG factors will be widely integrated into financial markets and business practices, and in many regions, ESG has already become a mandatory regulatory disclosure requirement.

Combination of Investment and Value

On the other hand, a new generation is gradually taking up major positions in society. Unlike the older generation, they pay more attention to some universal values, including green living, justice and others. By incorporating ESG into investments, investors can take the lead and have a positive impact on the environment and society.

For example, the United Nations proposed 17 sustainable development goals as early as 2015, with a view to eradicating poverty, reducing inequality and combating climate change by 2030 or before. In order to achieve these goals, developing countries face a financing gap of up to USD 2.5 trillion⁴ a year. The private market capital is therefore as equally as important as the public funds. This presents an opportunity for investors to make a contribution towards a better future. According to estimates by the Organisation for Economic Cooperation and Development (OECD), the integration of the UN’s Sustainable Development Goals (SDG) into business strategies will generate at least USD 12 trillion in revenues and create 380 million new jobs⁴.

The new era of the financial market has arrived. The old-fashioned mindset of seeking nothing but profits will be gradually ruled out. The megatrend of future investment will be the combination of investment and values. Investors, are you ready?

1. Source: Global Sustainable Investment Alliance Global Sustainable Investment Review 2020
2. Source: Bloomberg Intelligence. 21 July 2021
3. Source: UNEP FI
4. Source: <>, OECD and UNDP, 2020