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US Looks to EU to Unlock ESG Opportunity

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18 July 2022

Regulatory Actions Plus Emerging Trends Signal Shift in the US ESG Market

Abstract

WHAT WILL IT TAKE TO UNLOCK THE LARGEST ESG MARKET IN THE WORLD?

The US ESG market continues to expand. And, while many cite remarkable growth rates (32% CAGR from 2016 to 2021) the overall market is still incredibly small especially when compared to the EU.

The US market share for ESG funds* continues to hover around 1% or $400 BN. In comparison, the UK/EU ESG market share stands at 13% or $2.3 T AUM on a much smaller asset base.

Also, in 2021, UK/EU fund flows represented 52% of total fund flows outpacing conventional funds.

Why has ESG growth in the EU outpaced the US? What can the US learn from the EU? What will it take to unlock the growth potential in the US?

While there are certainly cultural and political reasons that have helped to drive ESG growth in the EU, we believe that the stream of regulations implemented over the last five years were the keys to unlocking the EU’s ESG opportunity.