Worldwide, governments are increasing their response to promote sustainable financing. The push for the initiatives comes due to increased social and environmental awareness, as well as the knowledge of the role finance has to play in accomplishing sustainable development objectives.
The increasing awareness and concern regarding environmental and social issues, including climate change, resource depletion, and social inequality, are likely to drive the growth of the market. This increased awareness has raised the demand for sustainable finance solutions as individuals, companies, and institutions want to align their investments with their values and contribute to a more sustainable future. In addition, regulatory environments and government policies are also contributing significantly to the growth of the market.
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| Report Attribute | Details |
|---|---|
| Base Year | 2024 |
| Sustainable Finance Market Size in 2023 | USD 758.34 Billion |
| Forecast Period | 2024-2035 |
| Forecast Period 2024-2032 CAGR | 26.45% |
| 2035 Value Projection | USD 979.34 Billion |
| Historical Data for | 2021-2023 |
| No. of Pages | 240 |
| Tables, Charts & Figures | 360 |
| Segments covered | Investment Type, Transaction Type, Investor Type, and End-use |
| Growth Drivers |
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| Pitfalls & Challenges |
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Sustainable investments have shown equal financial performance compared to their counterparts and risk management potential, leading investors who desire financial returns along with positive social and environmental effects. This new preference by investors has led to an increase in sustainable investment strategies and products, propelling the growth of the sustainable finance sector. Furthermore, technological innovation and data analytics have contributed to shaping the market significantly. The quality of data relating to Environmental, Social, and Governance (ESG) factors has also increased, allowing investors and financial institutions to determine the sustainability performance of firms and investment portfolios more reliably.
Tools and platforms based on technology have also promoted the integration of ESG factors into investment processes, ensuring that sustainable finance is more accessible and streamlined. Besides, firms and organizations increasingly consider the role of sustainability in their long-term business models. Embracing sustainable practices not only minimizes risks but also improves brand image, customer loyalty, and employee motivation. This business trend towards corporate sustainability has raised demand for sustainable finance solutions to back green initiatives, sustainable supply chains, and good business practices.
Market, By Investment Type
- Equity
- Fixed income
- Mixed allocation
- Others
Market, By Transaction Type
- Green bond
- Social bond
- Mixed-sustainability bond
- ESG integrated investment funds
- Others
Market, By Investor Type
- Institutional investor
- Retail investor
Market, By End-use
- Utilities
- Transport & logistics
- Chemicals
- Food & beverages
- Government
- Others
Investment Style Insights
The active segment was the market leader in 2024. Active investment strategies mean that portfolio managers actually choose and manage investments using their skills and judgment. In sustainable finance, active managers have a critical role to play in finding firms that not only meet financial goals but also subscribe to sustainable practices and principles. By undertaking rigorous research and analysis, active managers are able to recognize sustainable investment opportunities and make thoughtful decisions that are congruent with ESG considerations. Through this method, investors have a more focused and customized exposure to sustainable assets, enabling them to both make a positive contribution and seek financial returns.
The passive segment is anticipated to expand at a highest CAGR throughout the forecast period. Passive investment entails following an index or a benchmark and replicating its performance without actively choosing individual securities. Passive investing, in the sustainable finance space, is picking up pace as sustainable indexes and ESG benchmarks gain popularity. Passive strategies appeal to investors as they provide broad exposure to a diversified basket of sustainable firms that share their values and sustainability objectives. Passive funds like ESG-oriented ETFs and index funds have attracted sizeable inflows based on investors’ search for transparent, low-cost, and readily available sustainable investment solutions.
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Investor Type Insights
The institutional investors segment led the market in 2024. Institutional investors, including pension funds, sovereign wealth funds, and insurance companies, are key drivers of sustainable investment practices. Institutional investors possess the capital resources and long-term investment time horizons to invest significant capital in sustainable investment strategies. Institutional investors increasingly acknowledge the value of incorporating ESG factors into their investment decisions in order to mitigate risks and obtain sustainable long-term returns.
