Riding the ESG Momentum: A Decade-Long Surge Propels Sustainable Finance to US$ 3768.4 Billion by 2034
Riding the ESG Momentum: A Decade-Long Surge Propels Sustainable Finance to US$ 3768.4 Billion by 2034
The sustainable finance market is estimated to be worth US$ 60,35,620.4 million in 2024. The market is likely to attain a valuation of US$ 3,76,83,566 million by 2034.

The sustainable finance market is estimated to be worth US$ 60,35,620.4 million in 2024. The market is likely to attain a valuation of US$ 3,76,83,566 million by 2034. Increasing awareness of environmental and social issues among investors serves as a pivotal force, driving demand for sustainable investments.

Regulatory support worldwide, such as the European Union’s Taxonomy Regulation, provides a structured framework, boosting the integration of sustainability principles into financial markets. The growing emphasis on Environmental, Social, and Governance (ESG) factors by institutional investors further accelerates the industry, influencing corporate practices and redirecting capital towards environmentally and socially responsible projects.

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While the sustainable finance industry experiences substantial growth, it faces inherent challenges and restraints. One primary obstacle is the lack of standardized and accessible data on ESG factors, hindering accurate risk assessment and portfolio management. Establishing transparency and trust is a persistent challenge impacting investor confidence.

Expanding access to sustainable finance solutions in underserved markets, particularly in rural communities and developing economies, holds immense potential. Strategic partnerships between financial institutions, governments, and NGOs can enhance outreach and inclusivity. Notably, there’s a surge in social and sustainability bonds, reflecting an increased focus on inclusive development and social impact.

Climate risk assessments are gaining prominence as investors prioritize understanding the environmental risks associated with their portfolios. Biodiversity finance is emerging as a critical theme, emphasizing the importance of preserving biodiversity alongside traditional sustainability measures. These trends signify a shift towards a more holistic approach to sustainable finance, integrating social, environmental, and governance considerations into financial decision-making.

“Leveraging technology, such as fintech solutions and blockchain, can streamline processes and enhance the efficiency of sustainable finance offerings. Furthermore, the rising demand for green bonds, climate-focused investment funds, and impact investing solutions opens avenues for product innovation.” – opines Sudip Saha, managing director at Future Market Insights (FMI) analyst.

Key Takeaways from the Sustainable Finance Market:

  • In 2024, the green bonds segment is likely to take the lead with a commanding 33.30% share.
  • The equity segment leads the industry with a 44.40% share in 2024.
  • From 2024 to 2034, the sustainable finance industry in the United States is expected to register a 19.80% CAGR.
  • The sustainable finance industry in Germany is expected to expand at a 20.50% CAGR through 2034.
  • The China sustainable finance industry is expected to develop at an astounding 20.30% CAGR through 2034.
  • The sustainable finance industry in India is expected to thrive at a 80% CAGR through 2034.
  • The sustainable finance industry in the United Kingdom is expected to continue to rise at a steady 21.10% CAGR through 2034.

Competitive Landscape of the Sustainable Finance Market:

The sustainable finance industry is experiencing robust growth, yet the competition is evolving rapidly with an influx of new entrants and established players vying for dominance. Traditional financial institutions are encountering heightened competition from innovative newcomers, such as fintech startups and specialized asset managers focusing on sustainable investments. This increased competition emphasizes the urgency for companies to differentiate themselves in an environment where market share is a sought-after commodity.

Several factors are shaping the competition in the sustainable finance industry. The trend towards specialization in areas like green bonds and social impact investing underscores the need for companies to carve out distinct niches.  Key players, ranging from traditional financial institutions to nimble fintech startups and impact investors, bring diverse strengths to the market, from extensive resources and brand reputation to agility and innovation.

Leading Key Players:

  • BlackRock
  • Refinitiv
  • Acuity Knowledge Partners
  • NOMURA HOLDINGS, INC
  • Aspiration Partners, Inc.
  • Bank of America
  • BNP Paribas
  • Goldman Sachs
  • HSBC Group

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Recent Developments in the Sustainable Finance Market: 

  • Bank of America increased its environmental business initiative target to US$ 1 trillion by 2030, aiming to support low-carbon and sustainable business activities across sectors such as clean energy, transportation, water, and waste.
  • BNP Paribas closed a sustainability-linked syndicated credit facility of US$ 8.25 billion, the largest of its kind in the US market, which ties the interest rate to the bank’s performance on three ESG indicators: greenhouse gas emissions intensity, renewable energy financing, and gender equality.

Sustainable Finance Market Segmentation:

By Investment Type:

  • Equity
  • Fixed Income
  • Mixed allocation
  • Others

By Transaction Type:

  • Green bond
  • Social bond
  • Mixed- sustainability bond
  • ESG Integrated Investment Funds
  • Others

By Investor Type:

  • Institutional investors
  • Retail investors

By Industry Vertical:

  • Utilities
  • Transport & logistics
  • Chemicals
  • Food and beverage
  • Government
  • Others

By Region:

  • North America
  • Latin America
  • Europe
  • East Asia
  • South Asia

Author:

Sudip Saha is the managing director and co-founder at Future Market Insights, an award-winning market research and consulting firm. Sudip is committed to shaping the market research industry with credible solutions and constantly makes a buzz in the media with his thought leadership. His vast experience in market research and project management a consumer electronics will likely remain the leading end-use sector cross verticals in APAC, EMEA, and the Americas reflects his growth-oriented approach to clients.

He is a strong believer and proponent of innovation-based solutions, emphasizing customized solutions to meet one client’s requirements at a time. His foresightedness and visionary approach recently got him recognized as the ‘Global Icon in Business Consulting’ at the ET Inspiring Leaders Awards 2022.

 

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