The Uncertain Future for ESG in Wealth Management

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ESG investing is growing rapidly in retail wealth management. But most of the large ESG ratings providers are focused on institutional asset managers, not retail wealth managers.

There are three main areas where asset managers and retail wealth managers differ in their ratings needs: standardization, customization and intuitiveness. With the asset manager marketplace dominated by a few established ESG providers, new entrants have focused on creating products targeted at the specific needs of wealth management, which may enable advisors to provide ESG advice to their clients.


ESG1 is not a new concept in asset management. The first socially conscious public fund was established in 1928 by Pioneer Investments (now part of Amundi). Although it was not bound by its prospectus to do so, it avoided “sin stocks” and let people know it. In the 1980s, my college and many like it saw a strong student movement to divest its endowment of companies that did business with apartheid South Africa.

While ESG is not new, its rapid growth in the last five years is remarkable. The 2020 Global Sustainable Investment Review reports that assets under ESG management in the US rose from $8.7 trillion at the end of 2015 to $17.1 trillion at the end of 20192. It also reports that assets under ESG management as a percentage of all assets under management rose from 21.6% to 33.2% over the same period, which helps control for market movements. Either way, it suggests the popularity of ESG investing is growing rapidly.