By Juliette Portala
(Reuters) – Over two-thirds of European asset managers and distributors are considering halting the launch or distribution of products that do not comply with environmental, social and governance (ESG) standards, a survey by PwC Luxembourg showed on Monday.
Flows into ESG funds have surged in recent years, driven in part by a growing regulatory focus on issues such as climate change as governments seek to push more money to activities that can help them meet their net-zero emissions goals.
The PwC survey of 3,354 respondents suggested ESG assets domiciled in Europe could grow to between 7.4 trillion euros and 9.0 trillion euros ($7.8 to $9.5 trillion) by 2025 and account for up to 56% of total European mutual fund assets, against 37% at the end of last year.
Against that backdrop, almost 72% of European asset managers were willing to halt all non-ESG product launches, with more than 60% planning to do so by the end of 2024, PwC wrote in its report, adding it foresaw long-term challenges for asset managers that maintain a hybrid ESG/non-ESG product range as the shift materialises.
Among independent financial advisers, private and retail banks, as much as 68% plan to cease their distribution of non-ESG products altogether, of which over half intend to do so within the coming two years, the survey showed.
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“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,” financial services market leader at PwC Olivier Carre said.
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(Reporting by Juliette Portala; Editing by Simon Jessop and Mark Potter)