Sustainable finance surges despite volatile markets during COVID-19
The value of sustainability-themed investment products amounted to $3.2 trillion in 2020, up more than 80% from 2019.
With a growing need to mobilize the vast sums of capital needed to meet
the Sustainable Development Goals (SDGs) by 2030, UNCTAD’s latest World Investment Report estimates that
the value of sustainability-themed investment products amounted to $3.2
trillion in 2020, up more than 80% from 2019, showing that the capital market
is increasingly aligning itself with sustainable development outcomes,
including the SDGs.
These products include sustainable funds (over $1.7 trillion), green
bonds (over $1 trillion), social bonds ($212 billion), and mixed-sustainability
bonds ($218 billion) (Figures 1 and 2).
Figure 1 - Number and AUM of sustainability-themed funds, 2010-2020
(Billions of dollars)
based on Morningstar and TrackInsight data.
Notes: Numbers of funds do not include those that were liquidated; the numbers for 2020 are as of 30 June.
Figure 2 - The $1.5 trillion sustainable bond market continues growth in
2020 (Billions of dollars)
Source: UNCTAD based on Bloomberg data.
However, most sustainability-themed investment products are domiciled and invested in developed economies. To maximize impact on sustainable development, more funds could be invested in developing countries where the needs are largest and where there are also many business opportunities. Meanwhile, there are persistent concerns about greenwashing and the real impact of these products.
Role of institutional investors and
financial service providers
Institutional investors are in a strong position to influence change on
sustainability through asset allocation and active ownership, and have become
an important financing source for sustainable development.
With over $60 trillion worth of assets under management, pension funds and sovereign wealth funds can have enormous influence on corporate sustainability.
Insurance companies can contribute to sustainable development through
their role as risk solution providers and as investors (with assets under
management worth more than $30 trillion). The banking sector can foster
sustainable development through corporate lending. By 2020, the sustainable
loan market had reached about $200 billion.
Role of stock exchanges
Stock exchanges exert sustainability impact through their influence on corporate environmental, social and governance (ESG) behaviour and through the promotion of sustainable finance products (Figure 3).
Figure 3 - Stock exchange trends, 2000-2021 (Number of
Source: UNCTAD, SSE database
The number of stock exchanges with written guidance for listing firms on ESG disclosure (SDG 12.6) has grown rapidly, from 13 in 2015 to 56 at the end of 2020.
Mandatory ESG reporting is on the rise. The number of exchanges covered
by mandatory rules on ESG disclosure have more than doubled in the past five
years, to 25 today.
The number of stock exchanges with dedicated sustainability bond
segments (SDG 13) increased by 14 between 2019 and 2020, taking the total to
We expect trends to continue to increase rapidly as UNCTAD’s Sustainable
Stock Exchanges initiative further strengthens its assistance to exchanges to
help them with their sustainability activities.
Future of sustainable finance
Looking ahead, the market needs to tackle concerns of greenwashing and
address its geographical imbalance.
Much work has been done over the past decade by asset owners,
institutions, exchanges, regulators and policymakers.
In the coming years, the sustainable investment market needs to
transform from a niche to a mass market that fully integrates sustainability in
business models and culture. To this end, UNCTAD, together with partners, will
launch the UN Global Sustainable Finance Observatory that will address the
challenges of fragmentation in standards, proliferation in benchmarking,
complexity in disclosure, and self-declaration of sustainability.
The observatory will work in tandem with the standard-setting processes
of the financial industry and regulatory bodies to promote the full and
effective integration of sustainable development, as defined by the SDGs, into
all aspects of the global financial ecosystem.
will be launched officially at UNCTAD's World
Investment Forum in October 2021, which will bring together the
global investment-for-development community, including all capital market
stakeholders along the global investment chain.
For information on UNCTAD 15 go here.