2025 Global Sustainable Investing Outlook Presentation_It's all about performance

Summary of Key Points from the Conference Call Industry Overview - The conference call focuses on the Global Sustainable Investing landscape, particularly the performance and trends in sustainable assets under management (AuM) and the implications of macroeconomic factors on sustainable investing strategies. Core Insights and Arguments 1. Performance Expectations: The anticipated tailwind for sustainable equities due to a global slowdown did not materialize, leading to a neutral performance outlook for sustainable investments in the mid-year review [8][9][11]. 2. Growth in Sustainable AuM: Sustainable AuM grew by 7% in the first ten months of 2024, reaching US$3.2 trillion, primarily driven by returns rather than inflows [9][19]. 3. Underperformance of Sustainable Funds: Sustainable funds underperformed the broader market across most regions, with sustainable equity funds lagging by 6% year-to-date [20][23]. 4. Regional Fund Flows: European sustainable equity funds experienced slight inflows, but these were offset by outflows in the US and Asia. In fixed income, sustainable net flows outpaced the broad market, particularly in Europe and Asia [10][39]. 5. Macroeconomic Signals: The performance outlook remains uncertain due to conflicting macroeconomic signals, with a slight moderation in growth and interest rates potentially supporting ESGQ performance [11][66]. 6. Policy and Regulatory Changes: The EU is expected to see an inflection point in environmental and social policymaking, while the US may face setbacks in sustainable investing under a potential Trump administration [12][50][68]. 7. Sustainable Investment Themes for 2025: Key themes identified include biodiversity, energy transition, governance, and financial inclusion, with specific regional focuses [13][99]. Additional Important Content 1. GSS+ Issuance Trends: GSS+ issuance remains significant in Europe, although it has declined from the 2021-22 peak. The US market is expected to see a continued decline in labelled issuance [14]. 2. Sector Allocation Implications: The implications of sector allocations on sustainable fund performance are unclear, with sustainable funds typically overweight in utilities and underweight in consumer discretionary sectors [47]. 3. Sustainable Fund Classification: SFDR Article 8 funds performed adequately, while Article 9 funds underperformed, reflecting the complexities in fund flows and performance dynamics [32][34]. 4. Emerging Market Developments: Emerging markets are increasingly prioritizing sustainability, with Brazil and China making significant strides in environmental policies and regulations [92]. 5. Corporate Governance in Japan: Japan's corporate governance reforms are influencing other Asian markets, with a notable increase in shareholder proposals and a focus on capital efficiency [94]. This summary encapsulates the key points discussed in the conference call, highlighting the current state and future outlook of sustainable investing, along with the regulatory landscape and emerging trends.