Bloomberg Intelligence’s Global 2025 Outlook has forecast sustainable investment to reach US$35 trillion in AUM in the next five years, despite a “fundamental shift”. The report predicted that in 2025 ESG investing will become more “pragmatic” and “resilient” in the face of widening backlash, weaker sentiment and increased regulatory burden, with investors heightening their focus on quantamental strategies. However, the US$35 trillion forecast is down from the US40 trillion projection in Bloomberg Intelligence’s 2024 report, revised due to 85% lower growth and market contraction in the US last year. Europe is predicted to be the largest driver of demand for ESG investments, while the US’ share of demand may fall below 20% (down from 30%) due to rising litigation risks and negative perceptions of ESG. The analysis estimates that global ESG ETF flows will rise 12.5% to US$45 billion. While well below the peak of US$160 billion in 2021, Bloomberg Intelligence stated ESG ETFs could hit US$1.3 trillion, even when accounting for 50% slower growth last year. Global sustainable debt offerings could expand to a record US$2.1 trillion this year, driven by strong green and social bond issuance. The report added that specialised products such as blue bonds, catastrophe bonds and debt-for-nature swaps could see growth. It also suggested that AI, cyber security, nature risks and water security are key themes that will demand investor attention in 2025.
