The asset management industry is a key player in channeling savings toward sustainable investing

In recent years, there have been multiple studies about the investment required to achieve global carbon neutrality. The results may vary, but it is commonly accepted that we will have to invest between 7% and 9% of the world's GDP every year in the energy transition. According to McKinsey, we must invest c. $275 trillion cumulatively until 2050.

Against this backdrop, channeling funds toward sustainable investing gains particular relevance: financing for companies in transition, renewable energy projects, supporting the development of new technologies like green hydrogen, etc.

The asset management industry currently represents around $130 trillion in AuM, i.e. 30% of the global financial assets, and therefore must play a key role in our journey toward a decarbonized economy. At the moment, ESG-oriented assets under management account for over 15% of the total, with growth rates much higher than the industry's (they have multiplied by 10 in barely 7 years).

Since December 2020, the leading players in sustainability within the sector can be found in the Net Zero Asset Managers Initiative (301 signatories representing 59 trillion dollars of assets under management). The signatories commit to supporting the "net zero greenhouse gas emissions" target by 2050 or sooner, in line with the ambition of limiting global warming to 1.5°C above pre-industrial levels.

In parallel to this initiative, the United Nations is promoting the Principles for Responsible Investment (5,319 signatories representing more than $129 trillion in assets). Although the PRI are not exclusive to the asset management industry, they have gained significant relevance in recent years. BBVA Asset Management is a signatory of the Principles since 2021.

Asset managers are supporting the decarbonization targets by incorporating ESG criteria into their investment decisions, offering 100% sustainable investment alternatives, improving transparency and ESG information for their clients, implementing engagement strategies with the companies they invest in (including AGM voting policies), among other actions.

Regulation to fight greenwashing

Greenwashing is probably one of the main challenges the industry is facing. Key to fighting this threat is having homogeneous standards in place to clearly distinguish between sustainable and non-sustainable investments. The European Union has tackled this issue from three angles: i) with the Corporate Sustainability Reporting Directive (CSRD) to enhance the information on sustainability disclosed by companies, based on the Non-Financial Reporting Directive (NFRD); ii) the Taxonomy to establish clear criteria using a classification system based on a list of environmentally sustainable activities; and iii) the Sustainable Finance Disclosure Regulation (SFDR) to create an information disclosure framework for financial institutions and products.

Under the SFDR, financial products are classified in article 9 (with specific sustainable investing objectives), article 8 (promoting certain environmental or social characteristics) and article 6 (others).

However, there is still a high degree of uncertainty in the  industry about the regulation's implementation. In fact, in recent months, important asset managers, leaders in promoting sustainability like Amundi, have decided to reclassify their article 9 funds as article 8 in view of the potential risk of a more restrictive interpretation of the SFRD by national regulators.

Additionally, the regulator has made changes to include the ESG angle in regulations like the MiFID II, to impose new obligations on managers, e.g. finding out about the sustainability preferences of their clients.

The regulatory framework is still evolving and albeit there is still uncertainty, the industry is moving step by step in the right direction – after all, the climate change clock keeps ticking.

At BBVA, we have long been convinced of the importance of working for a more sustainable future and, for this reason, sustainability is one of our strategic priorities. At BBVA Corporate and Investment Banking, we are not only committed to helping our corporate clients in their transition, we are also supporting our institutional clients, such as asset managers, in our common efforts to achieve a sustainable future.