pwc.lu
2022
The growth opportunity
of the century
Are you ready 
for the ESG 
change?
Sustainable Finance Series
Traditional Asset and Wealth Management

Foreword ...................................................................................................................................................................................................4
Executive Summary ...........................................................................................................................................................6
1. A paradigm shift ........................................................................................................................................................12
1.1 Regulation – policymakers accelerating industry shift
1.2 ESG outperformance – the gap widens in the future
1.3 Surge in investor demand leaves the industry with no choice
1.4 Rapidly shifting societal values highlighted during COVID-19 pandemic
1.5 Asset and wealth managers need to increase the speed and scope 
      of their ESG efforts
2. Unlocking the ESG opportunity ................................................................................................28
2.1 Repositioning your organisation
2.2 Being credible and consistent in your ESG approach
2.3 Moving to the next level of ESG integration at a product level
2.4 Tackling the ever-present ESG data challenge
2.5 Develop a strong ESG risk management process
2.6 Going beyond the minimum reporting requirements
2.7 Educating the investment community and your staff
Conclusion ......................................................................................................................................................................................44
Contacts ..............................................................................................................................................................................................45
Table of Contents

4 | 2022: The growth opportunity of the century
Foreword
While the term was originally coined in 2005, ESG 
emerged as somewhat of a buzzword following the 
implementation of the UN Sustainable Development 
Goals (SDGs) in 2015. Back then, ESG investing was 
a niche investment strategy that was adopted by 
only the most sustainably conscious of asset and 
wealth managers. Nonetheless, this marked the onset 
of a paradigm shift in the investment landscape - 
establishing the first voluntary link between sustainability 
and financial services. This was a watershed moment in 
sustainable finance, preceding major milestones such 
as the signing of the UN Paris Agreement in 2016 and 
the release of the European Commission’s Action Plan 
on Financing Sustainable Growth in 2018. These have 
tightened the reins on the sustainable finance agenda, 
implementing mandatory minimum standards and 
highlighting how the asset management industry could 
play a key role in driving positive change.
In the new decade, the wheel that began turning in 2015 
has reached unparalleled speed; and ESG has gone 
from a trend to a revolution of proportions unseen in 
the European fund industry since the advent of UCITS 
and AIFMD. Virtually all stakeholders in the asset 
management landscape are attributing strategic focus 
to sustainability issues, and the Asset and Wealth 
Management (AWM) industry’s role in addressing them. 
Institutional investors, in particular, are prioritising 
non-financial impacts alongside financial returns, 
demonstrating a strong proclivity for sustainable 
products and managers. Moving forward, we expect to 
see this trend mirrored by retail investors as millennials 
increasingly enter the investor base and upcoming 
changes to MiFID investment suitability rules encompass 
sustainability factors.

PwC Luxembourg | 5
We are seeing a similar shift in sentiment among 
EU policymakers, with a recent surge in regulatory 
momentum embedding ESG as a central tenet of 
the investment landscape. The above resulted in a 
widescale blurring of the boundary between traditional 
and sustainable investment; a boundary which we 
expect to have all but disappeared by 2022, by which 
the Taxonomy and Sustainable Finance Disclosure 
Regulation will have been fully implemented in the 
EU. Widespread unrest surrounding racial and gender 
inequality, rising wealth disparity and the escalating 
climate crisis have added fuel to the ESG fire; further 
highlighting the room for improvement in managers’ 
approaches to considering ESG investment criteria and 
embedding ESG standards within their own corporate 
processes. Successful change will require the alignment 
of both services, products and corporate sustainability.
In PwC’s “Sustainable Finance, A New Era for Asset 
Managers” report published earlier this year, we initiated 
a discussion about how changing regulation was 
expected to impact asset management operations and 
how managers could best prepare for imminent change. 
Evidently, recent events have heightened the urgency 
and prominence of ESG issues like never before. Change 
is undeniably upon us and asset managers must adapt 
fast in order to thrive. In this report, we quantify and 
assess Europe’s dominance in the global ESG sphere, 
identify any shortcomings and emphasise the urgent 
need for asset managers to embark on full-scale ESG 
integration both within their business strategies and their 
operations. We then propose a roadmap that we believe 
will set asset managers on the path to achieving total 
strategic and operational ESG integration. 
Reflecting on when the UN SDGs shone the spotlight 
on the connection between financial prosperity and 
environmental protection in the context of the present 
day, we believe that there has never been a time like 
the present to establish an inherent link between 
profitability and sustainability. Doing so would represent 
a century-defining opportunity not only for Europe’s 
asset management industry, but in Europe as a whole. It 
is our view that by striving to be ESG aligned, asset and 
wealth managers will not only be able to sail the tides of 
change, but also to protect investors against downside 
risks and conquer new investment opportunities 
- realising financial and non-financial value that is 
meaningful not only to investors and regulators but to 
society as a whole. We hope that this report sparks the 
necessary conversations among industry stakeholders 
and provides the guidance that asset and wealth 
managers need to take advantage of this landmark 
change. 
Olivier Carré  
 
 
 
 
Luxembourg Financial 
Services Leader
Steven Libby   
 
 
 
 
EMEA Asset and Wealth 
Management Leader

6 | 2022: The growth opportunity of the century
The ESG1 wave has begun to break! Societal changes mark our generation and decade: Black Lives 
Matter protests have sparked some of the largest discussions related to persistent and pervasive 
racism (both covert and overt), mass climate protests have left young people concerned whether 
humanity will survive the next 100 years, and the global pandemic has highlighted the growing 
disconnect between the one percent and the other 99. The current focus on ESG policy within the EU 
(EU Action Plan for Financing Sustainable Growth) is certainly not addressing all of these problems 
completely, but for the first time, this new regulatory standard puts non-financial and financial KPIs 
on a level playing field and attempts to re-direct capital to more sustainable business activities. Thus, 
for the financial services industry and corporate businesses in the EU, it is no longer a matter of if this 
wave washes away old structures and business patterns, but when. This marks a landmark change in 
investment approach and as such to the competitive environment for asset and wealth managers – a 
change that represents an opportunity that will resonate long after the end of this decade.
The financial services industry has long ridden the coattails 
of societal change, waiting for certainty in the way that 
non-financial factors influence performance and return 
of their investments. The myth of underperforming “ESG 
aligned assets” has long been widely accepted wisdom in 
our industry. Yet, with the change in policy and the clear 
intention of the EU regulators to favour capital flows into 
sustainable economic and business activities, this wisdom 
could soon prove false. In fact, we are already seeing 
leaders in the AWM space distancing themselves from this 
widely held belief –spearheading the move towards ESG 
strategies and investments not only in response to investor 
demand and to create performance, but even more so to 
avoid underperforming assets in industries that are non-
sustainable. 
Sustainability might not be the golden ticket to 
outperformance, but it could very soon be widely 
accepted as a source of downside protection against 
ESG related risks.
The expectations and market trends investigated in our 
paper stress the immediate need for the Asset and Wealth 
Management industry to actively endorse the ESG trend 
and for the leaders to step-up their strategic measures in 
order to change along with the times.
A vast majority of institutional investors expect a 
convergence between ESG and non-ESG products by 
2022, and 77% of them plan to stop purchasing non-
ESG products in the same year. While asset managers 
agree that there will be a convergence, only 14% plan to 
stop launching non-ESG products by that time. Therein lies 
the fundamental disconnect. You cannot have your cake 
and eat it too, so the saying goes. For asset managers, this 
will ring true – you cannot be both ESG and non-ESG. 
While ESG is commonly considered a rapid and significant 
development, many managers see it as just another 
product, similar to smart-beta or factor investing. Our data 
and market views will prove these sentiments wrong. 
ESG is nothing less than an all-encompassing shift in 
the investment landscape; placing financial and non-
financial performance criteria on a level playing field. It 
might have the same, if not a greater, impact than the 
introduction of UCITS or AIFMD standards. Indeed, the 
emergence of Sustainable Finance policy in Europe 
will see a significant impact not only on products 
(UCITS, AIFs, Discretionary Mandates), but on financial 
agents (MiFID firms, Insurance brokers) and fiduciary 
investors (Insurance companies, pension funds) at the 
same time.  
The rapid uptick of ESG products is ushering in a 
paradigm shift across the greater European AWM 
industry. In Europe alone, in our best-case scenario, 
we expect ESG fund assets under management 
(AuM) to account for over 50% of total European 
mutual fund assets by 2025. This will represent a 
staggering 28.8% compound annual growth rate 
(CAGR) from 2019 to 2025.  
ESG’s impact will transcend Europe’s borders, and will 
likely have immediate impacts outside the EU, given EU 
investor requirements imposed on non-EU corporates 
and financial market participants – just as was the case 
with the AIFMD and MiFID II.
Executive Summary
1 We define ESG funds as those classified as Article 8 or 9 in the SFDR for future assets. For current and past assets, 
we define ESG as funds that have been classified by Lipper/Morningstar as ESG.

PwC Luxembourg | 7
1. Complete regulatory overhaul
The regulatory and legislative momentum behind 
ESG has shifted and strengthened significantly 
in recent years. We have seen a major shift from 
voluntary regulations and initiatives to rigid and 
binding legislation. This rising legislative and 
regulatory pressure has bolstered the increased 
attention ESG is receiving and is likely to have 
the biggest impact on accelerating the shift to a 
sustainable model of investing. As the regulatory 
landscape develops, unsustainable corporates will 
lose out on capital and non-compliant sectors will 
be penalised as a result. Interestingly, the COVID-19 
crisis has stimulated a strong response from 
policymakers on the important role that ESG can and 
should play in economic recovery measures (i.e. a 
“green recovery”). In the face of the rigid and ever-
changing regulatory environment, AWMs, as well 
as corporate and institutional investors, will need to 
adapt to the new normal in order to remain relevant.
3. Increasing investor demand
A shift in societal values has given rise to a new 
generation of investors who prioritise non-financial 
impacts alongside financial returns. The strongest 
push stems from institutional investors, who are 
reacting to increasing pressure from policymakers 
and stakeholders to incorporate sustainability 
into their mandates. Considering this, managers 
are experiencing increasing client pressure to 
incorporate ESG standards into their fund offerings. 
In order to meet this demand, asset managers have 
taken action; launching new funds with sustainable 
mandates and repurposing funds. However, the 
speed and scope of embracing the ESG revolution 
by asset managers need to accelerate.
2. ESG’s outperformance
A wealth of research has disproved the widely held 
belief that in order to invest sustainably, investors 
must sacrifice strong returns. To the contrary, there 
is increasing evidence that suggests a perfect 
synergy between performance and sustainability. 
Moreover, ESG-aligned assets also outperformed 
the market in the wake of the COVID-19 sell-off; 
with a Bloomberg analysis finding that the average 
ESG fund declined by 12.2% in 2020, less than half 
the decline of the S&P 5002. We believe that, as we 
emerge into the new normal’ the performance gap 
between ESG and non-ESG products will continue to 
widen, as ESG investment processes become more 
sophisticated and the increasing impact and social 
acknowledgment of sustainability risks further shifts 
investor sentiment in favour of ESG investments. 
We also expect to see a wider range of products in 
the future as more corporates turn green, providing 
opportunities for enhanced diversification.
4. Fundamental societal 
shifts, magnified by current 
environmental, social and health 
crises
The rise of ESG is bolstered by significant societal 
changes. Public awareness of ESG related risks 
has catapulted climate change and sustainability to 
the top of the global agenda. Society is attributing 
increased levels of importance to sustainable finance 
and ESG. COVID has accelerated this shift, bringing 
the real-life impacts of overlooking ESG factors into 
the spotlight.
In a European context, we’ve identified four key catalysts that are driving the sustained growth of ESG:
These catalysts are set to usher in the greatest shift 
the European AWM industry has ever undergone; 
presenting managers with the opportunity to drive 
change by playing a key role in mitigating climate risk. 
As the European Commission has noted, the scale of 
investment needed to transition to a sustainable and 
green economy is beyond the capacity of the public 
sector alone. Asset managers can change the world for 
the better by rechannelling capital towards sustainable 
businesses and innovations, contributing to the creation 
of a low-carbon, climate resilient and circular economy 
and strengthening efforts to eradicate social injustices 
across the globe. 
2 Bloomberg, Older ESG Funds Outperform Their Newer Rivals in Market Tumult, 2020

8 | 2022: The growth opportunity of the century
We have identified seven key actions that managers should consider from both a strategic and operational 
perspective in order to stay ahead of the curve and make these changes.
1. Repositioning your organisation
As the ESG revolution fast approaches, managers must 
carefully consider what role they would like to play in it. A clear 
strategic decision needs to be made as to how deeply they 
would like to embed ESG considerations in their organisation. 
We have identified three strategic options that asset managers 
can pursue: they can restructure to become a “sustainable 
asset manager”, undergoing a strategic overhaul and 
integrating ESG at all levels of their organisational structure. 
Alternatively, they can pursue a selective strategy, maintaining 
both ESG and traditional products; or maintain business as 
usual – complying with regulation but overall sticking to the 
status quo.
3. Moving to the next level of ESG 
integration at a product level
Once managers have positioned themselves with regards 
to ESG, they must make a number of strategic product 
considerations. Firstly, they must decide which new 
“Sustainable Finance Disclosure Regulation” category they 
would like to launch their products under (i.e. Art. 9, Art. 8 or 
non-sustainable). They must then decide how to implement 
ESG indicators in their investment and risk processes, how 
they will structure and rationalise their fee structures; and how 
they will elucidate and market their ESG efforts to the investor 
base.
2. Being credible and consistent in your 
ESG approach
Beyond the above mentioned necessary strategic changes, 
managers must also strive to be consistent in their chosen 
ESG approach in order to establish and maintain credibility. 
This calls for a demonstrable commitment to walking the 
talk by exemplifying the same level of sustainability and ESG 
consciousness in corporate strategy and philosophy that asset 
managers expect from their portfolio companies. They must also 
talk the walk by upping transparency and thoroughness in internal 
ESG reporting, as well as by embarking on firmwide circulation of 
ESG knowledge in order to harmonise their sustainability story.
4. Tackling the ESG data challenge
The ESG data constraints that asset managers face border 
mainly on inaccuracy and non-alignment. This impacts ESG 
benchmarking, impact evaluation, risk management and 
the identification of sustainable investment opportunities. 
We identify two main options available to Asset and Wealth 
managers when it comes to overcoming this hurdle. Firstly, 
they can engage more closely with underlying corporates in 
order to receive accurate and timely date sets and reporting. 
Secondly, they can manage various data sources in order 
to foster an internal data environment sufficiently granular 
and exhaustive to serve their needs by implementing solid, 
regulatory-backed ESG reporting strategies and leveraging on 
third-party data providers. However, considering an immature 
data market, the management and intellectual assessment 
of ESG data will be one of the key success factors for Asset 
and Wealth managers leading the ESG competition over the 
coming three to five years.

PwC Luxembourg | 9
5. Develop a strong ESG Risk 
Management framework
As investors and policymakers alike attribute increasing 
importance to the assessment and mitigation of ESG risks, 
asset managers will need to vitally restructure their risk 
management frameworks in order to comply and thrive. 
Overlooking ESG-related risks could have serious reputational 
and financial repercussions for asset managers in the new 
landscape. Developing a more resilient structure for risk 
management involves adopting and implementing expert risk 
identification and management practices internally and within 
underlying corporates. Managers will also have to monitor 
and evaluate portfolios at a high level and frequently disclose 
whatever ESG exposures there may be. Furthermore, they will 
have to reinforce efforts to ensure ESG compliance of investee 
companies either through greater engagement or through 
proxy voting.
6. Reporting to investors
As regulatory requirements relating to reporting and disclosure 
mount, and investors attribute increasing attention to the ESG 
metrics of the asset managers with which they invest, it is 
imperative that AWMs restructure their reporting processes. 
Those that go above and beyond minimum reporting 
requirements stand to be the biggest winners in this new 
landscape. 
7. Educating the investment community 
and your staff
In order to accelerate the consideration for ESG 
indicators and risks as well as to successfully respond 
to an increased expectation of investors for ESG 
matters, asset and wealth managers need define their 
ESG strategy and corporate indent. Based on this they 
need to educate both their portfolio companies and 
their investors on ESG and the interaction with capital 
flows and financial performance. It will be critical to 
build stronger ESG expertise among their employees 
by upskilling existing staff on ESG principles and 
strategically scout for and integrate more diverse and 
ESG-trained talent.

10 | 2022: The growth opportunity of the century
About our European Sustainable 
Finance Series and this report
This paper marks the first in our European Sustainable 
Finance Series. Given the critical importance of sustainable 
finance globally, we have endeavoured to highlight the key 
issues that face all players within the Financial Services 
sector. 
The aim of this report is to take a deep dive into these 
major trends that are already transforming the ESG 
wave sweeping across the European traditional asset 
management industry, and which looks set to continue 
in the years ahead. Within this report we only discuss 
ESG related to traditional asset class (i.e. Equities, Fixed 
Income, Mixed Asset and Money Market) funds. We use 
our findings to make informed recommendations as to the 
key actions that AWMs should consider in order to navigate 
the changing ESG landscape and unlock the opportunities 
it presents. We have further enhanced our report based on 
a wide range of primary data gathered through a Europe-
focused survey of 200 asset managers, 300 institutional 
investors, and over 800 retail investors. We also carried out 
in-depth interviews with a number of asset managers and 
institutional investors in order to get first-hand accounts of 
where the players think the industry is going.

PwC Luxembourg | 11

12 | 2022: The growth opportunity of the century
A paradigm shift
1
ESG represents the largest fundamental change in the investment landscape since the introduction 
of ETFs. We forecast European ESG assets to reach between EUR 5.5 trillion and EUR 7.6 trillion by 
2025, making up between 41% and 57% of total mutual fund assets in Europe by 20253; up from 15.1% 
in end-2019 (cf. Exhibit 1). Driven by four catalysts, we believe that this will be the fastest growing area 
within the industry this decade.
Exhibit 1: ESG and non-ESG Assets held in European mutual funds (EUR bn)
Source: PwC Global AWM Research Centre analysis, Morningstar, Refinitiv Lipper, EFAMA
651.1
911.0
1,182.8
1,208.9
1,663.0
5,594.9
7,327.0
8,548.2
8,075.1
9,337.0
2012
2015
2017
2018
2019
6,246
8,238
9,731
9,284
11,000
15.1%
84.9%
ESG Assets
Non-ESG Assets
3 Note: Based on PwC Market Research Centre forecasts that overall European mutual fund assets in a U-shaped scenario will reach 
USD 15.8 trillion by 2025, which converts to EUR 13.4tn at the current exchange rate of 1 USD = 0.85 EUR (as of 30th September 2020).

PwC Luxembourg | 13
Exhibit 2 & 3: Global ESG AuM by domicile (%) & European ESG Mutual Fund AuM by theme (EUR bn)
It’s December 2019; ESG mutual fund assets amount 
to 15.1% of the EUR 11 trillion held in European 
mutual funds. Europe dominates the global ESG 
landscape, with the region’s 4,741 ESG mutual funds 
holding almost 70% of global ESG assets (cf. Exhibit 
2). Within ESG, broadbased funds (those without a 
specific ESG focus) account for almost 75% of all 
funds, which is unsurprising given that they are likely 
to be more attractive to a wider range of investors (cf. 
Exhibit 3). As European policy makers push decisive 
and all-encompassing regulations, ESG continues to 
outperform, investor demand grows, and societal shifts 
urge change, the AWM industry is set to be forever 
altered.
Note: Analysis of 9,700 ESG-labelled funds between 2010 and 2019
Source: PwC Global AWM Research Centre analysis, Morningstar, Refinitiv Lipper.
Luxembourg 
21.2%
France
11.9%
Sweden
9.4%
Ireland
5.6%
Europe
69.4%
Other
21.3%
North 
America
20.9%
Asia & Pacific
8.2%
MEA Africa & Latam
1.6%
2012
2015
2017
2018
2019
651.1
911.7
1,182.8
1,208.9
1,663.0
6.4%
5.6%
13.2%
74.8%
Broadbased
Environmental
Social
Governance
2019 ESG AuM by domicile

14 | 2022: The growth opportunity of the century
ESG values are becoming increasingly entrenched 
in Europe’s AWM ecosystem, with European ESG 
funds receiving significant backing from private 
and government-backed institutions. HSBC’s 2019 
Sustainable Financing and Investing Survey highlights 
the extent of Europe’s ESG-oriented mindset, 
discovering that Europe is the only region where 
the majority of investors (52%) always factor in ESG 
considerations when making investments4. Regional 
discrepancies remain however, with the Nordics 
leading the push for ESG – a strong indicator of the 
link to sustainability that is ingrained within the region’s 
financial systems. 
Europe’s dominance extends across all asset classes. 
However, equity, being the most popular asset class 
among investors when it comes to ESG, still attracts 
the lion’s share of assets; currently accounting for 65% 
of global ESG equity assets. This is not to say that 
assets in sustainable fixed income vehicles have not 
seen a period of remarkable growth in recent years, 
however. Since the first Green Bond was issued on the 
Luxembourg Stock Exchange in 2007, the European 
sustainable bond market has seen consistent growth, 
with AuM tripling from 2010 to 2019 to reach EUR 327.9 
billion, and currently represents 70.7% of the global ESG 
bond assets. The formidable growth that these asset 
classes have undergone are driver by a number of key 
factors, which we expect to accelerate moving forward. 
(see Core trends beside).
We strongly believe that Europe will maintain its 
pole position in the ESG space for years to come. 
However, should the asset growth slowdown 
resulting from the recent market slowdown persist, 
this will likely extend also to the ESG space. If this 
materialises, we foresee ESG asset growth slowing 
to roughly 13% CAGR from 2019 to 2025.
4 HSBC, Responsible Investment Review. 2019
5 Article 8 funds refer to financial products which promote environmental 
or social characteristics of the investment, either alone or in combination 
with other characteristics. Article 6 funds refer to other financial products 
which do not promote any form of sustainability.

PwC Luxembourg | 15
Core trends bolstering ESG Equity & Bond Adoption
Equity
1. 
Structurally linked
Equities are intrinsically linked to ESG considerations. 
There is a structural overlap between the 
“Governance” factor of ESG and the stewardship 
and ownership agenda which is inherent to active 
management. Corporate governance is one of the key 
value drivers in equities, with many studies finding a 
strong link between strong ESG metrics and lower 
volatility risk.
2. 
Institutional investor demand
A number of major institutional investors in Europe 
have bolstered equity investments to incorporate 
ESG into their portfolios – specifically pension funds 
and SWFs. In recent years, some of the world’s 
largest institutional investors have expanded their 
sustainability efforts in equity.
3. 
Outperformance and                      
 
underperformance
Financial attractiveness and performance are key 
drivers in equity’s dominance in the ESG asset 
universe. According to our analysis, the MSCI AC Asia 
ESG Leaders, Eurostoxx ESG Leaders 50, and S&P 
500 ESG indices outperformed their corresponding 
benchmark indices by 5.5%, 4.9% and 4.2% 
respectively over a two-year period*. Moreover, the 
downside risk on non-sustainable equity investments 
is likely to increase.
Bonds
1. 
Growing corporate bond  
 
 
market
We see increased issuance from non-financial 
corporates - both private and public. Corporate green 
bonds are playing an increasingly large role in the 
green bond market. While corporates only entered 
the green bond market in 2013, they represented over 
60% of issued bonds in 2018 according to ESMA.
2. 
Deepening entrenchment in  
 
EU regulation
A common taxonomy for the green bond market 
will aid in further harmonising standards across the 
region. This harmonisation would also ensure that the 
regulatory landscape helps AWMs embed sustainable 
funds in their investment processes, paving the way for 
more engagement with issuers.
3. 
Issuer diversification
The issuance of green bonds outside of the dominant 
markets (supranational entities) is growing. Private-
sector issuers are increasingly turning to green bonds 
to achieve their sustainable development strategies. 
In 2018, banks accounted for 21% of total ESG bond 
issuance in Europe, while no other single players 
accounted for more than 15%.
* We use a two-year period analysis because the Eurostoxx ESG Leaders 50 and the S&P 500 ESG were launched in 2019 hence historical 
performance is backtested.

16 | 2022: The growth opportunity of the century
Should current conditions persist, however, ESG stands 
to reshape the entire European fund landscape. The full 
pace and extent to which this occurs is largely dependent 
on a number of drivers. As a result, we have developed 
two potential forecast scenarios. In either case, Europe is 
set to capitalise on the opportunities presented by ESG 
and cement its position as the global leader in sustainable 
investment. 
The sheer transformational potential of ESG is highlighted 
by the fact that, even in a conservative forecast scenario, it 
is still poised to become the default approach for European 
asset managers Our base case scenario sees ESG AuM 
tripling by 2025 to reach just under EUR 5.5 trillion, a CAGR 
of 21.9% from 2019 (cf. Exhibit 4). This “conservative” 
scenario is likely to materialise should we see a continuation 
of current market trends and product launches, with 
European asset managers simply aligning with regulations. 
While these regulations do not apply to non-EU countries 
within Europe, we believe that the major non-EU markets, 
namely the UK, Switzerland and Norway, will still align with 
regulations, developing ESG-relevant regulations modelled 
on those implemented in the EU. That being said, in the base 
case, the majority of assets are unlikely to be reclassified as 
Article 8 or 95 (less than 30%). 
Our best-case forecast sees a complete overhaul of the 
European asset management industry with sustainable 
products redefining the current landscape. Should this 
occur, we see AuM growing at a 28.8% CAGR to reach EUR 
7.6 trillion by 2025 (cf. Exhibit 4). This scenario sees a full 
endorsement and implementation of new ESG regulations 
by market participants, catalysing major structural shifts, as 
well as a significant reclassification of legacy products into 
Article 8 or 96 products. Moreover, this scenario sees asset 
managers predominantly launching new products classified 
as Article 8 or 9, rather than as “non-ESG” in the coming 
years. This, combined with a strong asset performance, 
would see Europe represent 74% of global ESG assets by 
2025. Equities, given the acceleration of current growth 
drivers, will see a 26.8% CAGR and AuM more than 
quadruple to exceed EUR 3.6 trillion by 2025. Similar to the 
base case, bonds are likely to see the strongest growth 
given companies looking at targeted issuances for specific 
sustainable projects. COVID-19 is further accelerating 
bond’s growth case with a number of companies looking for 
financing. The ECB, for example, announced it would use its 
EUR 2.8 trillion asset purchase scheme to buy green bonds 
for the first time. This will likely have a knock-on effect, 
spurring demand for green bonds throughout the financial 
sector. Given the above factors, in this scenario, we see ESG 
bond fund AuM growing at a 30.4% CAGR to reach just over 
EUR 1.6 trillion by the end of 2025.
Exhibit 4: European ESG Mutual Fund AuM (EUR billion)
Equity
Bond
Mixed Assets
Money Market
586.0
651.1
911.7
1,182.9
1,663.0
5,462.8
7,596.8
1,208.9
2010
2012
2015
2017
2018
2019
2025f base
2025f best
Source: PwC Global AWM Research Centre analysis. Past data based on Morningstar and Refinitiv Lipper.
6 Article 9 funds refer to financial products which have sustainable investment (as per art. 2(17) of the SFDR) as their investment objective.

PwC Luxembourg | 17
We further based our forecasts on the continuation of four key catalysts that are fuelling the ESG revolution, 
embedding sustainability concerns into the financial system and solidifying Europe’s position as the global 
leader in sustainable finance. 
These catalysts are:
1 Regulation
2 Outperformance of ESG funds
3 Growing investor demand
4 Societal shifts, highlighted by COVID-19

18 | 2022: The growth opportunity of the century
1.1 Regulation – policymakers 
accelerating industry shift
Arguably the primary differentiator which cements 
Europe as the global leader in the ESG space is 
its strong regulatory and legislative structure. This 
momentum behind ESG has been highly conducive to 
the market’s growth, pushing the transition towards a 
sustainable standard for investing – with EU regulators 
leading the charge.
EU regulators have been increasingly aware of Financial 
Services’ role in mitigating sustainability risks and 
have taken an increasingly hard-line approach to 
implementing relevant legislation. Both the EU Action 
Plan and the Sustainable Financial Disclosure Regulation 
(SFDR) represent a landmark change in the industry, that 
stand to transform sustainable finance from an optional 
consideration to a focal point of the European fund 
industry. 
From 2021 onwards, a range of core new regulations 
will be introduced, and pre-existing regulations will 
be altered to align with sustainability requirements (cf. 
Exhibit 5). This will introduce a whole new set of non-
financial standards for investors, financial advisors 
and financial market participants. Change is coming 
and the AWM industry must adapt accordingly to not 
only comply but thrive in this new landscape where 
sustainable investment is no longer optional, but 
mandatory. 
Exhibit 5: Regulatory roadmap - 2020 to 2023
2019
2020
2021
2022
2023
Dec 2019
Entry into force of:
• Disclosures 
Regulation (“SFDR”)
• BMR amendments
28/06/2021
Deadline for EBA to report to 
EC on potential inclusion of ESG 
risks in the SREP performed by 
competent authorities (based on 
CRDV/CRRII amendments)
01/01/2023
Application date of Taxonomy 
technical screening criteria for the 
environmental objectives: 
• Sustainable use and protection of 
water and marine resources
• Transition to a circular economy
• Pollution prevention and control
• Protection and restoration of 
biodiversity and ecosystems
30/04/2020
Deadline for 
benchmark 
administrators to 
comply with BMR 
amendments
Q1 2021
Expected Publication of 
EC Proposal revising 
NFRD (e.g. mandatory 
TCFD Recommendations)
Q1/Q2 2022
Expected application date of:
• MiFIDII amendments
• UCITS/AIFMD amendments
• IDD amendments
• SolvencyII amendments
July 2020
Entry into force 
of the Taxonomy 
Regulation
01/01/2022
Application date of Taxonomy 
technical screening criteria for 
the environmental objectives:
• Climate change mitigation
• Climate change adaptation
Q4 2020
Expected Publication of: 
• EC Renewed Sustainable Finance 
Strategy (e.g. possible legislation on 
EU GBS)
• JRC Report on final draft technical 
criteria for EU Ecolabel, subject to 
public consultation
Dec. 2019
Publication of EBA 
Action Plan/Milestones 
regarding Sustainable 
Finance until 2025
30/06/2021
Application date of the 
Principal Adverse Impact 
of investment decisions 
on sustainability factors 
(SFDR)
Source: PwC Sustainable Finance Conference 2020
10/03/2021
Main application 
date of SFDR

PwC Luxembourg | 19
These upcoming regulations will have four major implications for the AWM industry by:
These changes stand to restructure the entire European 
fund industry. The Action Plan and SFDR introduce 
a long-needed harmonisation of ESG taxonomy and 
disclosure that has long been a source of concern and 
confusion for investors. In doing so, EU regulators have 
brought a degree of certainty and objectivity to the 
realm of sustainable finance.
Moreover, in the face of the COVID-19-related 
disruption, we are seeing a strong push from European 
policymakers to stimulate a “green recovery” in the 
region. The European Commission has unveiled a EUR 
750 billion recovery plan to stimulate EU economies out 
of the downturn, applying the “do no harm” principle to 
all investments. Moreover, EUR 150 billion of the funding 
will be allocated to funding green transport, clean 
industry, and green home renovations. This represents 
a significant shift in policymaker mentality that may see 
a greener approach to fiscal stimulus and sovereign 
investment overall as we emerge from the pandemic into 
the “new normal”.
Obliging 
fiduciary 
investors to go 
ESG
Fiduciary investors will 
need to apply suitably 
sustainable investment 
classification practices, 
incorporating sustainability 
into their prudential 
requirements and ensuring 
that their governance 
policies are compliant 
with ESG values and 
benchmarks.
Spreading good 
governance 
along the 
investment 
chain
By fostering greater 
investment into sustainable 
projects and companies, 
all market players will 
need to modify their 
investment and operational 
processes. This will require 
the implementation of a 
sustainability classification 
for financial products and 
a complete review of risk 
management procedures.
Implementing 
new disclosure 
requirements at 
an entity level
While managers will need 
to take new product 
disclosure levels to 
heart, they also need to 
understand and disclose 
how they are onboarding 
ESG into their internal 
operations. This will require 
enhancements across their 
governance, remuneration, 
and diversity policies. It 
will also require them to 
explain if, and why, they 
haven’t taken sustainability 
factors into account.
Implementing 
new disclosure 
requirements at 
a product level
AWMs will need to be 
far more specific in their 
product disclosures, 
providing investors and 
regulators with a high 
degree of transparency. 
Key questions will need 
to be answered relating to 
how a product considers 
principally adverse impacts 
on sustainability factors. 
Further, do the products 
specifically promote ESG 
characteristics or do 
they have a specific ESG 
objective.

20 | 2022: The growth opportunity of the century
1.2 ESG outperformance – the gap 
widens in the future
In the past, ESG adoption was often hampered by the 
notion that this form of investing had a negative impact 
on financial returns when compared to traditional 
forms of investing. Today, the opposite is true, with 
the resilience and performance of sustainable funds 
compared to their traditional counterparts being a key 
driver behind the ESG wave that is sweeping across the 
fund landscape.
Our analysis shows that ESG-aligned funds cumulatively 
outperformed their traditional counterparts by 9% over a 
period from 2010 to 2019. A Morningstar analysis7 shows 
similar results, noting that close to 60% of sustainable 
funds delivered higher returns than their non-sustainable 
equivalents over the last decade. ESG funds have also 
seen a significant rise in inflows, exceeding their non-
sustainable equivalents by over 15% from end-2018 to 
April 2020, when relative to their AuM (see Exhibit 6). 
Exhibit 6: ESG vs non-ESG flows and performance end-2018 to April 2020 
 
 
 
 
0%
10%
1%
2%
3%
4%
Performance
Non ESG
ESG
Net flows (in % of AuM)
Note: Size of the bubble related to AuM relative to flows
Source: PwC Global AWM Research Centre based on Morningstar and Refinitiv Lipper
7 Morningstar, How does European Sustainable Funds’ performance measure up?, 2020

PwC Luxembourg | 21
Backtesting by asset managers has also shown that 
integrating ESG considerations into investment decisions 
tends to provide enhanced returns. A Schroders 
analysis revealed that companies with a commitment 
to improving their ESG profile produced risk-adjusted 
stock returns 20% higher than the MSCI Europe Index 
and approximately 70% higher than companies with 
deteriorating ESG scores. Our survey showed that 
backtesting has become a widely used method in order 
to demonstrate ESG outperformance, with the majority 
of respondents having backtested their funds. 
COVID-19 has further highlighted the performance 
and resilience of ESG funds through stressful market 
periods. While traditional asset classes suffered near-
unprecedented outflows in Q1 2020, the financial 
impact of the pandemic was not felt as strongly in 
the ESG space – with ESG funds outperforming the 
broader market and for the most part seeing inflows 
during the first quarter of 2020 (cf. Exhibit 7). This is in 
strong contrast to their traditional counterparts, that 
saw EUR 160 billion in outflows in the same period. 
Actively managed ESG funds in particular showed 
a higher degree of downside protection during this 
period, outperforming their passive counterparts and 
underscoring the benefits of having a human touch 
to portfolio management. For active managers, this 
could represent a unique opportunity to leverage on 
the financial resilience they provide to break away 
from passives and lead the pack. That being said, 
passive ESG indices still outperformed their traditional 
counterparts, despite their relative underperformance 
compared to active ESG. As we see a deepening 
entrenchment of ESG values in the fund landscape, we 
expect to see increased interest in ESG among both 
active and passive managers.
The resilience and downside protection provided 
by ESG products throughout periods of downturn is 
somehow unsurprising, given that these qualities are 
inherent to their nature. By their very definition, ESG-
oriented managers are specifically focused on navigating 
uncertainty and environmental, social, and governance 
risks. It is this strong degree of adaptability and constant 
monitoring that allows these managers to identify – and 
avoid – potential financial losses and scandals before 
they impact returns and product value.
We believe that this performance gap between ESG 
and non-ESG products will widen significantly in the 
future, and that the long-held concern of ESG products’ 
tendency to underperform will reverse entirely – with 
these products emerging as a stronger source of 
returns with respect to their mainstream equivalents. 
As regulation stimulates sustainable investment, 
and societal scrutiny of climate change and social 
injustice approaches boiling point, we expect to see 
unsustainable corporates and sectors lose out on capital 
or be penalised. As this trend progresses, we will likely 
see the performance gap between ESG and non-ESG 
products widen significantly. Already, the European 
Investment Bank (EIB) has transitioned towards a climate 
bank model citing performance concerns, suggesting 
that this shift may be well underway. In the short-term 
however, limitations to the ESG investment universe 
could hamper portfolio diversification and risk mitigation.
Exhibit 7: COVID-19 highlights ESG outperformance and attractiveness
Jan-20
Feb-20
Mar-20
Equity Global
Equity Global
Equity Europe
Equity Europe
-12.6
-21.0%
-20.5%
-25.4%
-20.9%
-13.3%
-19.4%
-19.9%
-20.0%
-10.4
-5.0
-1.0
-1.4
-7.0
Performance of active vs passive ESG funds 
during COVID-19 (in %)
AuM % change between Dec 2019 and Mar 2020
Active
Active
Passive
ESG
Non-ESG
Passive
Source: PwC Global AWM Research Centre analysis based on Refinitiv Lipper and Morningstar

22 | 2022: The growth opportunity of the century
1.3 Surge in investor demand leaves 
the industry with no choice
Investors are leading the green revolution, demanding 
that asset managers allocate capital in a sustainable 
manner. Both retail and institutional segments are 
showing fast increasing interest in sustainable 
investment and are increasingly allocating capital in a 
sustainability conscious manner. 
Inflows into Europe-domiciled sustainable products were 
particularly pronounced in 2019, more than tripling from 
the previous year. Moreover, our analysis shows that 
annual net flows into ESG funds as a percentage of AuM 
have consistently exceeded those into non-ESG funds 
since 2014. The flows into European ESG products in 
2019 represented 19.8% of their total AuM, while non-
ESG fund flows (although larger in absolute terms) only 
accounted for 3.8% of their AuM (cf. Exhibit 8). These 
strong inflows persisted throughout the COVID-19 crisis, 
with investors allocating a record-breaking volume of 
assets to ESG funds during the pandemic. In fact, ESG 
fund flows accounted for almost a third of all European 
fund flows in Q2 2020 according to Morningstar.
Exhibit 8: ESG vs non-ESG net flows 
2012
2013
2014
2015
2016
2017
2018
2019
EUR 241.7 bn
EUR 359.2 bn
6.7%7.4%
3.1%
6.7%
6.2%
2.7%
6.3%
14.1% 14.5%
-1.5%
7.3%
3.8%
19.8%
3.7%
4.9%
6.7%
European non-
ESG funds AuM 
European ESG 
funds AuM
European non-ESG 
funds net flows
European ESG 
funds net flows
ESG
Non-ESG
* The size of the circles are scaled to European non-ESG AuM
Sources: PwC Global AWM Research Centre analysis based on Morningstar and Refinitiv Lipper
AuM and flows analysis of European 
ESG & non-ESG funds (as of 2019)* 
Yearly net flows of European ESG vs non-ESG funds 
(in % of AuM)

PwC Luxembourg | 23
While both investor segments have been instrumental in 
the push towards ESG, institutional investors are leading 
the charge. ESG has begun to redefine institutional 
investors’ perception of the industry and their role within 
it. Some of the largest have already begun to expand 
their sustainability efforts and embrace more ambitious 
strategies in this area. Our survey shows that 99% of 
institutional investor respondents expect a convergence 
between ESG and non-ESG fund products – with an 
overwhelming majority expecting this to occur by 2022 
(cf. Exhibit 9). 
Within the institutional segment, pension funds are 
strong proponents of ESG. The Institutional Investors 
Group on Climate Change, a coalition of more than 60 
pension funds and investment managers managing 
more than USD 16 trillion, recently announced a 
series of measures to design a net zero framework for 
portfolios. Furthermore, we expect to see the demand 
from this particular segment rise further under mounting 
regulation. While European pension funds have been 
permitted to take ESG consideration into account since 
the ratification of IORP, proposed amendments to 
IORP II from the European Insurance and Occupational 
Pensions Authority (EIORPA) could see these 
considerations become a regulatory requirement. If 
approved, these revisions would solidify the key role of 
European pension funds in the global ESG space. 
Exhibit 9: Institutional investors expect ESG and non-ESG convergence by 2022 
Equity (small-cap) Funds
Equity (large-cap) Funds
Governmental bond Funds
Non-governmental bond funds
Mixed asset Funds
2020
2021
2022
2023
2024
Do you believe there will be a convergence 
of traditional ESG and non-ESG products? 
(Institutional Investors)
If yes, by when do you believe this will 
occur? (Institutional Investors)
Yes
99%
No
1%
19%
36%
13%
13%
16%
60%
45%
32%
34%
43%
37%
36%
28%
5%
6%
3%
12%
11%
10%
19%
15%
2%
3%
Base: Those who believe there will be a convergence of 
traditional ESG and non-ESG products (296) 
Sources: PwC Global AWM Research Centre

24 | 2022: The growth opportunity of the century
While ESG-oriented investment philosophies are 
commonplace within the European institutional segment, 
it is the Nordic players in particular that are leading 
the race and solidifying Europe’s leading position. 
Norway’s USD 1.1 trillion SWF is set to emerge as one 
of the world’s largest investors in unlisted renewable 
energy infrastructure in the next three years8, taking 
EUR 9 billion in positions. The SWF has also begun 
a divestment process relating to oil, gas and coal 
corporations – with Swedish and Danish pension funds 
following suit. As institutional demand continues to surge 
and AWMs pivot towards sustainability, we expect to 
see Europe’s AWM industry become increasingly ESG-
focused, both in terms of products and institutions.
The retail investor segment lags behind institutional 
but is fast catching up – especially as an increasing 
number of millennials enter the space. Currently, only 
41% of retail investor respondents incorporate ESG 
considerations into their investment strategies. However, 
this is not to say that retail investors are not increasingly 
moving in this direction. Assets in this space are likely to 
see a far stronger growth in the coming years, however 
we believe that this largely stems from regulatory 
efforts rather than an overwhelming sense of societal 
responsibility on the investors’ part. 
However, as the millennial and subsequent generations 
become more active, retail investors are likely to take up 
the ESG mantle. Millennials are set to be on the receiving 
end of a record-breaking USD 41 trillion intergenerational 
wealth transfer, and 95% are interested in sustainable 
investing according to Morgan Stanley9. This new 
generation of investors stands to vitally reshape the 
future of investment. In response to this, asset managers 
are likely to further integrate ESG considerations into 
their investment processes – launching new funds with 
sustainable mandates and repurposing existing funds.
This expected growth in assets could, however, be 
hampered by limitations to investment opportunities 
outside of the EU for both managers and investors. 
Managers may find that regulatory constraints, given 
their fiduciary responsibility, could restrict investments 
in ESG products outside the EU despite investor 
appetite; as it will be difficult to find products that 
meet EU regulatory specifications in non-EU countries 
who are not bound by these regulations. This could 
potentially limit the investment universe accessible to 
managers, with negative impacts on diversification and 
performance.
8 IPE, Norway’s SWF braces for big fluctuations in next three years, 2019
9 Morgan Stanley, Sustainable Signals, 2019

PwC Luxembourg | 25
1.4 Rapidly shifting societal values 
highlighted during COVID-19 pandemic 
Global discourse has shifted in recent years, marked 
by a growing recognition of the threats that could 
materialise if ESG and sustainability issues continue 
to be overlooked. ESG risks have topped the WEF’s 
Global Risk Landscape10 both in terms of severity and 
likelihood, outranking threats that tend to place far higher 
on the global political agenda, such as terrorism and 
financial failure (cf. Exhibit 10). Similarly, Deutsche Bank 
recently identified four catastrophic ESG-related tail 
risks which stand to majorly disrupt the global economy 
within the coming decade11. 
10 The World Economic Forum’s Global Risks Landscape maps out all major risks that 
pose a legitimate threat to everyday life according to key decision makers globally.
11 Deutsche Bank, After Covid: The Next Massive Tail Risk, 2020
Exhibit 10: 2020 global risks landscape 
Likelihood
Impact
Natural disasters
Extreme weather
Man-made environmental disasters
Biodiversity loss
Water crisis
Interstate conflict
Global governance failure
Asset bubbles
Fiscal crisis
Social instability
National governance failure
Illicit trade
Unmanageable inflation 
Failure of urban planning
Terrorist attack
State collapse
Critical infrastructure failure
Unemployment
Financial failure
Food crisis
Infectious diseases
Weapons of mass destruction
Deflation
Energy price shock
Climate action failure
Source: World Economic Forum Global Risks Landscape 2020

26 | 2022: The growth opportunity of the century
The social and investor sentiment shifts have already 
had concrete implications on the global financial system, 
factoring ESG metrics into the economic value and 
pricing of certain goods and services. The widescale 
acceptance of these price restructurings in the real 
economy suggests that investors may be equally as 
accepting of paying a premium for ESG products; as 
far as they can see the value being provided by asset 
managers.
The COVID-19 pandemic and subsequent market 
downturn will catalyse the shift in society’s awareness of 
ESG issues. This will likely further advance the strategic 
case for sustainable investment, shining light onto the 
materiality of ESG issues and demonstrating the impact 
ESG risks can have on the worldwide economic system. 
The results of our institutional investor survey mirror this, 
with 97% of respondents stating that the pandemic
will impact their ESG approach in the future (cf. Exhibit 
11). Similarly, 71% of institutional investors surveyed 
by JP Morgan responded that it was “rather likely,” 
“likely,” or “very likely” that the occurrence of a low 
probability/high impact risk, such as COVID-19, would 
increase awareness and actions globally to tackle high 
probability/high impact risks such as those related to 
climate change and biodiversity losses.
The AWM industry has so far played a key role in 
mitigating sustainability risks and meeting societal 
expectations by going beyond their mandate. However, 
this role will need to continue to adapt quickly to 
increasing demands from both legislators and investors 
as new ESG investing rules are set and demand surges 
into the future.
Exhibit 11: Vast majority of AWMs believe COVID-19 
will impact their ESG approach 
Yes
97%
No
3%
Will the COVID-19 pandemic impact your ESG approach 
for the future in any manner? (Asset Managers)
Source: PwC Global AWM Research Centre
The game-changer in 2020 
has obviously been COVID-19. 
And in the aftermath of the 
pandemic we wouldn’t be 
surprised if regulators choose 
to intensify their scrutiny on the 
ways in which ESG risks more 
broadly are integrated within the 
investment process.
Michael Baldinger, 
Head of Sustainable & Impact Investing, 
UBS Asset Management

PwC Luxembourg | 27
1.5 Asset and wealth managers need to increase 
the speed and scope of their ESG efforts 
The industry is at a turning point – where non-
ESG funds risk falling by the wayside, finding 
it increasingly difficult to gain traction with 
investors. We believe that investments into ESG 
and sustainability will bring about a fundamental 
restructuring of the investment landscape, changing 
the very nature of the industry from the ground up. 
European managers are seemingly well aware that 
change is on the horizon, with 94% of the asset 
managers we surveyed anticipating a convergence 
of ESG and non-ESG products (cf. Exhibit 12). Many 
asset managers are adjusting to the ESG wave and 
have begun reinventing themselves accordingly.
With as many as 360 new funds with sustainable 
mandates launched in Europe in 2019 alone12, it is clear 
that ESG funds have emerged as one of the key areas for 
fund innovation. Moreover, current funds are becoming 
increasingly sustainable – with managers repurposing 
legacy funds into sustainable funds and actively engaging 
with their portfolio companies to ensure that they are 
operating in a sustainable manner.
What separates European asset managers from those 
in other regions is that they are being proactive in their 
approach to ESG, increasingly acknowledging their 
role in developing an ethical and sustainable model of 
finance. As a result, we are seeing an increasing number 
of managers adapting their businesses and products 
to operate in a sustainable manner. This is reflected 
in the volume of managers aligning their practices in 
accordance with a number of voluntary ESG codes and 
regulations such as the UN’s Principles for Responsible 
Investing (PRI), which now has over 2000 asset manager 
signatories backed by asset owners with a combined 
AuM of over USD 90 trillion.
That being said, there is room for improvement and 
managers should consider increasing the speed and 
scope of their ESG efforts. While the vast majority 
acknowledge that a major change is on the horizon, 
many seem to be somewhat hesitant to alter their 
operations accordingly. According to our survey, only 
14% of European AWMs plan to stop launching non-ESG 
products within the coming 24 months. 
In order to meet this surging demand, successfully 
navigate and thrive within the ever-changing landscape, 
there are a number of key actions that we recommend 
European asset managers take.
12 Morningstar estimates
Exhibit 12: Managers less convinced about ESG and non-ESG convergence than Institutional Investors 
Equity (small-cap) Funds
Equity (large-cap) Funds
Governmental bond Funds
Non-governmental bond funds
Mixed asset Funds
2020
2021
2022
2023
2024
Do you believe there will be a convergence 
of traditional ESG and non-ESG products? 
(Asset managers)
If yes, by when do you believe this will occur? (Asset Managers)
Yes
94%
No
6%
Source: PwC Global AWM Research Centre
29%
21%
11%
11%
33%
39%
52%
19%
26%
18%
34%
47%
5%
31%
25%
22%
19%
32%
27%

28 | 2022: The growth opportunity of the century
Unlocking the ESG 
opportunity
2
ESG is destined to structurally alter the competitive environment within the industry. In 
order to thrive and fully unlock the ESG opportunity, European Asset & Wealth Managers 
will need to reconsider their value proposition and competitive distinctiveness. This will 
require not only a shift in how these managers consider their investments, but how they 
bring ESG principles into their own organisations – strategically and on an operational 
level. As the idiom states, they need to talk the talk and walk the walk. 
In this section, we outline the key actions we believe managers should take. These stem 
across multiple areas and start at the strategic level before focusing on key operational 
factors that should be considered. These actions go from integrating ESG at an 
organisational and product level, to tackling the ESG data challenge and educating staff 
and investors. Finally, we will offer recommendations as to how market players should 
re-visit their competitiveness and the differentiation of their products and services.

PwC Luxembourg | 29
2.1 Repositioning your organisation
In order to best understand how to proceed, managers 
must evaluate the role they would like to play not only 
in the asset management industry, but society overall. 
They then need to make a board-level decision as 
to the definition of ESG within their organisation, the 
revaluation of their visions and missions and the extent 
to which they would like to incorporate ESG within 
their business functions. We have identified three main 
strategic options that asset and wealth managers can 
pursue: “business as usual”, a “selective approach” or 
“sustainable asset management”: 
“Business as usual”: Firstly, managers can opt to 
stick to the status quo, making no changes within their 
organisational and governance structure, investment 
philosophy/policies, risk framework or reporting other 
than the minimum regulatory requirements. This could 
be the result of a “wait and see” philosophy, where the 
respective asset managers want to see if ESG evolves 
into the default approach for investors (or if it loses 
steam over time) before committing to reshaping their 
strategy. That being said, given current industry, societal 
and regulatory trends, we believe these managers stand 
to lose out in the long term. As society and the investor 
base become increasingly ESG-conscious, and the 
regulatory momentum behind ESG accelerates, the 
managers that do not adapt will likely see a lower share 
of AuM going forward as they face increased investor 
and regulatory scrutiny. Furthermore, attempts to pivot 
towards a “sustainable asset management” strategy at 
a later stage may prove unsuccessful, as leaders with 
strong brands will have emerged, making it impossible 
for new entrants to win significant market share in this 
space. As a result, managers that maintain a “business 
as usual” approach risk potentially becoming niche 
providers within the coming decade as ESG becomes 
the new standard for investing. Furthermore, as their 
products will be predominantly non-ESG, they will 
potentially face higher downside risk on their assets and 
pressure on margins and profitability.
“Selective approach”: This strategy entails 
asset managers integrating ESG principles within 
key processes of their organisations in order to align 
with the varying interests of their internal and external 
stakeholders. This would entail simultaneously 
maintaining both ESG and non-ESG investment 
approaches, attributing equal importance to providing 
and marketing both strategies in an attempt to satisfy 
the demands of all investors. This strategy could prove 
as a useful stepping stone in transitioning towards a 
“sustainable asset management” model of operating. 
However, it poses a number of challenges. Firstly, 
the organisation’s focus will be divided in driving 
both ESG and non-ESG product lines, hence limiting 
top management’s resources to react quickly to any 
sudden changes in demand or investor perception. 
Secondly, a parallel strategy would also drive up costs 
as numerous processes would need to be replicated. 
Thirdly, the asset managers that opt for the selective 
approach also run the risk of appearing contradictory 
in their strategy, undermining their credibility in the 
eyes of an increasingly sustainability-conscious 
institutional investor base. Investors would likely 
question the credibility and sincerity of these managers’ 
commitments to ESG given that they also offer non-
ESG products and may not have implemented ESG 
considerations across their organisation. Finally, there 
will be little room for managers taking the selective route 
to impose pricing premiums on any sustainable products 
that do not integrate ESG as a primary investment 
strategy and simply rely on screening strategies – as 
these are already common among low-cost passive 
funds.
“Sustainable asset management”: Managers 
that pursue this strategy commit to having ESG become 
a core part of their vision and mission. This requires 
a revamping of not only their investment strategy, but 
their overall organisational strategy – anchoring ESG 
considerations from the bottom up and the inside out. 
These managers will have to view their activities and 
organisations through an ESG lens, taking an all-
encompassing approach to sustainability; from adapting 
their legacy products, to assessing the sustainability 
metrics of their entire business structure. All of their 
investments must have ESG as an investment objective 
or characteristic. Managers that explore this option 
should consider going above and beyond, engaging 
with portfolio companies in order to demonstrate 
that they are living their core values. Asset managers 
focusing on purely sustainable portfolios would benefit 
from the advantage of focusing their efforts and capital 
on developing the capabilities and brands of their 
organisation and emerging as potential leaders within 
the new ESG competitive landscape. Furthermore, the 
managers that adopt such a proactive position in terms 
of sustainability and ESG strategy are likely to benefit 
from strong differentiation from competition and goodwill 
with institutional investors.
That being said, all asset managers are still bound by 
minimum ESG regulatory reporting standards, regardless 
of the organisational strategy that they choose to pursue, 
with upcoming regulations standing to have a number of 
implications across the organisation.

30 | 2022: The growth opportunity of the century
2.2 Being credible and consistent in your ESG 
approach
Asset managers looking to position themselves as sustainable would need to clearly demonstrate 
that, not only do they offer ESG-oriented products, but that they apply ESG requirements to 
themselves. In order to do so, their entire corporate strategy and organisational philosophy must 
be modified to reflect the very same level of sustainability and ethically conscious thinking that they 
demand from their underlying corporates (cf. Exhibit 13).
Exhibit 13: Developing an ESG-aligned corporate operational roadmap
Corporate 
operational 
roadmap
Define the organisational structure
To integrate all activities around sustainability/ESG into the 
organisation (e.g. define the company‘s governance structures 
regarding sustainability) 
Greenify Corporate Services
Embed sustainability in the organisation, 
e.g. real estate, energy management or 
business travel 
Consider ESG-related risk 
Develop a corporate risk strategy to assess, 
monitor and manage sustainability risk
Revamp internal reporting 
Develop ESG-related KPIs and include it in management reports 
1
2
3
4
5
Adopt a sustainable approach 
to human resources
Integrate ESG in renumeration 
policies and in trainings 
Source: PwC Global AWM Research Centre

PwC Luxembourg | 31
If you want to 
succeed, all of your 
portfolio managers 
must be ESG aware. 
You must spread 
good practice from 
a centralised team 
to all departments: 
from compliance and 
marketing to sales 
forces.
Major European Asset 
Manager
Define the organisational structure
Asset managers will need to define ESG within their organisation and revisit their governance 
in the context of ESG, deciding how they plan to circulate and operationalise ESG expertise 
within their entire organisation. They need to decide whether to centralise their ESG 
knowledge within a single team or disseminate an ESG-conscious manner of thinking across 
their entire operations. The decision must also be made whether to task a Chief Sustainability 
Officer or board member with the oversight of sustainability issues. Addressing this dynamic 
is necessary to ensure firmwide convergence in ESG expertise and uniformity in their 
sustainability story. 
Greenify corporate services
Especially as a sustainable asset manager, taking a holistic view of the impact of every facet 
of their operations on ESG metrics is of pivotal importance. This extends throughout the 
entire organisation, from travel policy and waste management and company car policies, 
to the offices in which they operate etc. In the case in which managers do not have a Chief 
Sustainability Officer, they can rely on external ESG experts to evaluate the sustainability 
metrics of the organisation and provides relevant ESG policies and how to implement them. 
Greenify corporate services
Adopt a sustainable approach to human resources
There are numerous operational aspects of the corporate structure that managers can and should 
reshape in order to ensure that ESG considerations are deeply anchored in their organisational 
philosophies. Firstly, managers must take steps to reconfigure their HR policies to ensure that they 
are conducive to both diversity and inclusion. This has the capability to not only boost equality and 
close the wage and opportunity gap but is also commonly accepted to enhance engagement with 
stakeholders, enhance innovation and boost financial performance. This extends also to improving 
pay and promotion transparency, which is being increasingly regarded as instrumental to building 
trust between employers and employees, as well in addressing concerns of gender and racial wage 
gaps. Increasing transparency can help build a culture of trust and collaboration, which will in turn 
help managers to attract and retain talent.
Consider ESG related risk
Beyond the product and investment-related sustainability risk management, 
managers must look within their own operations to assess and rectify any 
potential ESG-related risk. The entire organisation must be viewed through an 
ESG-lens and adapted accordingly, embedding risk practices from the bottom 
up. Failure to do so could incur negative environmental, societal or governance 
impacts that could undermine any ESG efforts made by managers and could 
potentially lead to scandals and irreparable reputational damages. 
In order to mitigate these risks, avoid any damages to brand reputation and 
maximise sustainability; managers should consider implementing an overarching 
Corporate Social Responsibility (CSR) policy, self-regulating and monitoring their 
internal operations to ensure ESG-compliance is attained throughout their entire 
operations.
Revamp internal reporting
That being said, words speak just as loudly as actions in this new environment. 
New and incoming disclosure requirements significantly heighten the degree 
of transparency in the EU asset management industry. The EU Reporting 
Directives (NFRD, SFRD, SRD2) require managers to report not only on their 
sustainable investment approach, but also on how sustainability informs the way 
they operate their business and engage with their stakeholders. This provides 
an opportunity for asset managers to demonstrate their engagement within their 
communities and their actions as corporates in addressing environmental and 
social issues towards their stakeholders.

32 | 2022: The growth opportunity of the century
2.3 Moving to the next level of ESG integration 
at a product level 
Once they have defined their ESG ethos and decided on 
which type of organisation they wish to be, managers must 
undergo a strategic rethink of their investment approach 
and product strategy; clearly deciding whether to revamp 
their product shelf as purely ESG or to combine ESG 
and traditional products. However, those that opt for a 
pure ESG product line are faced by significant regulatory 
requirements.
Past efforts to embed ESG principles and criteria in AWM 
products have historically been limited to voluntary and 
non-binding initiatives such as the UNPRI or TCFD which 
relied on voluntary product and management standards. 
The EU taxonomy and SFRD, however, mark a major shift 
towards a mandatory and rigid regulatory structure. EU 
regulators have largely taken the decision out of managers’ 
hands, transforming ESG from a voluntary commitment to a 
compulsory consideration. This marks a critical milestone, 
paving the road towards a globally recognised methodology 
for assessing environmental sustainability.
Upcoming regulations will require that managers undertake 
a far more sophisticated level of ESG criteria assessment 
testing in order to qualify their investments as sustainable. 
The EU taxonomy filter must be applied as soon as 
available and defined. Moreover, the “comply or explain” 
concept also applies, i.e. asset managers promoting ESG 
funds need to disclose to investors the binding ESG criteria 
used to select and assess investments.
In order to meet the taxonomy criteria and be deemed 
environmentally sustainable, a product must contribute 
substantially to one of the six environmental objectives13 
identified by the European Commission, given that it does 
not harm any of the other aforementioned objectives. 
Furthermore, the Do No Significant Harm principle and the 
minimum safeguards criteria within the taxonomy call for a 
higher degree of granularity in terms of disclosure, both at 
the level of asset management entities and individual ESG 
products.
In order to comply with the SFDR, all EU financial market 
participants and all financial advisors will be required to 
assess and report to investors on their policies regarding 
the integration of sustainability risks in their investment 
decisions and investment advice. Moreover, large financial 
market participants will be required to assess and report 
to investors on any and all principal adverse impacts of 
investment decisions on sustainability factors. These will 
be measured using common “indicators” which will be 
established in upcoming legislation.
Moreover, following the different product classifications 
implemented by the SFDR, managers must make a 
clear and elucidated decision as to which category they 
operate within, as each category carries its own regulatory 
disclosure requirements (cf. Exhibit 14). 
Exhibit 14: SFDR category-specific disclosure requirements
Disclosure 
Precontrac-
tual  
Documents
• Information required for mainstream products
• Explanation on how the objective (e.g. 
environmental objective) is to be attained.
• If an index has been designated as a reference 
benchmark, information on how the designated 
index is aligned with that objective
• Taxonomy alignment or disclaimer
• Overall sustainability‐related impact of 
the financial product by means of relevant 
sustainability indicators
• If an index has been designated as a reference 
benchmark, a comparison between the overall 
sustainability‐related impact of the product with 
the impacts of the designated index and of a 
broad market index 
• Taxonomy alignment or disclaimer
• Description of the sustainable investment 
objective
• Information on the methodologies used to 
assess, measure and monitor the impact of 
the sustainable investments selected for the 
financial product
• Information required for mainstream 
products
• Information on how the characteristics (e.g. 
environmental characteristics) are met;
• If an index has been designated as a 
reference benchmark, information on 
whether and how this index is consistent 
with the characteristics
• Taxonomy alignment or disclaimer
• Extent to which environmental or social 
characteristics are met
• Taxonomy alignment or disclaimer
• Description of the environmental or social 
characteristics
• Information on the methodologies used 
to assess, measure and monitor the 
environmental or social characteristics 
• Manner in which sustainability risks 
are integrated into their investment 
decisions 
• Results of the assessment of the 
likely impacts of sustainability 
risks on the returns of the financial 
products they make available
• Whether principal adverse impact 
on sustainability indicators are 
being considered
• Disclaimer on taxonomy alignement
• No requirements on product level
SFDR - Art. 9 fund
SFDR - Art. 8 fund
SFDR- Non-ESG fund
Disclosure 
Periodic 
Reports
Disclosure 
Websites
Source: PwC Global AWM Research Centre
13 Climate change mitigation, climate change adaptation, sustainable use and 
protection of water and marine resources, transition to a circular economy, 
pollution prevention and control, protection and restoration of biodiversity and 
ecosystems.

PwC Luxembourg | 33
In order to thrive in this new regulatory environment and 
ensure that they make a positive impact on the society 
and environment in which they operate, European asset 
managers must make strategic decisions at a product 
level – deciding which type of products they want to 
promote; and the non-financial impacts they would like 
these products to have. In accordance with the product 
classifications set out by the SFDR, any manager can 
decide whether to continue providing products which 
do not promote any form of sustainability, integrate ESG 
characteristics among other aspects of the investment 
strategy (article 8), or completely revamp their products 
to be centred around sustainability objectives (article 9). 
Organisations that have decided to go for the “business 
as usual” approach would likely see the majority of their 
products not qualify as sustainable, with no need to 
revamp legacy products. They will nevertheless need 
to ensure that ESG risks are adequately assessed and 
considered within the investment process, and reported 
on in their offering documents and product websites.
On the other hand, sustainable asset managers will 
consider launching products under article 8 or 9 and 
can decide to revamp their legacy products accordingly 
in order to align with their value proposition. Asset 
managers opting for a selective approach, boasting both 
ESG and traditional products, can adapt their products 
how they see fit.
In any case, under the new disclosure requirements, 
even the most ESG agnostic managers will be required 
to change their product marketing and as such their 
product positioning. Moreover, the managers that 
choose not to launch ESG products and do not consider 
sustainability risks when making investment decisions 
will be regulatorily required to explain clear reasons for 
why they do not do so; as well as providing information 
as to whether and when they intend to consider adverse 
impacts. This increased transparency will likely foster 
greater investment in Article 8 and 9 funds, as the 
growing share of ESG-conscious investors is likely 
to avoid allocating their assets to less sustainable 
products.

34 | 2022: The growth opportunity of the century
2.3.1 Deciding on the pace of implementation
Regardless of the extent to which managers have decided 
to revamp their product strategy; they must choose 
when and at which pace they plan to operationalise ESG 
going forward; progressively transitioning their product 
range to ESG or adopting a more radical approach and 
halting traditional product launches altogether. As the shift 
towards ESG gains momentum, and investor demand for 
sustainable products skyrockets, it is evident that managers 
who wait too long to adapt their businesses accordingly risk 
missing out on the benefits of a first-mover advantage, and 
may eventually be unable to meet their investors’ demands 
for sustainable products. 
Our survey results demonstrate that 77% of institutional 
investors plan to stop investing in traditional non-ESG 
compliant products within the next two years; while only 
14% (cf. exhibit 15) of asset managers indicated plans to 
stop launching these products in the same time period. 
This disconnect highlights the urgency with which asset 
managers should make decisive choices about their ESG 
versus non-ESG product offerings in order to align with 
shifting investor interest. Thus, managers need to stay 
ahead of the curve and show leadership in this area in 
order to maximise their impact, especially as regulatory 
requirements evolve from a voluntary to a more rigid nature. 
In order to do so in an efficient and timely manner and come 
up with an informed decision, managers should formulate 
an ESG roadmap with milestones and deliverables.
From a wealth management perspective, the pace of change 
needed in sustainable investing will be rapid. Wealth managers 
will need to invest and innovate to develop credible sustainable 
solutions and meet rapidly growing client demand.
Andrew Lee, Head of Sustainable & Impact Investing, UBS Global Wealth 
Management Chief Investment Office
Exhibit 15: Vast majority of institutional investors plan to stop investing in non-ESG products by 2022 
Do you intend to stop launching non-ESG European 
funds within the near future? (Asset managers)
Do you intend to stop investing in non-ESG products 
within the next 24 months? (Institutional investors)
Yes
14%
No
86%
Source: PwC Global AWM Research Centre
Yes
77%
No
23%

PwC Luxembourg | 35
2.3.2 Pricing
In a high fee-pressure environment, bolstered by the flight 
to passives and rising investor and regulatory scrutiny, asset 
managers need to demonstrate the value for money that 
they are providing. This degree of competition is likely to 
also remain in the ESG space. Asset managers who opt to 
launch ESG products and/or revamp legacy products are 
likely to see their costs rise substantially as they are faced 
with increasingly stringent regulatory and data requirements 
in order to sufficiently assess and monitor the impacts of 
ESG risks. Thus, managers that choose to follow the ESG 
route, whether through a total revamp of their entire brand or 
in a selective approach, need to rethink their fee structures 
in order to maintain margins. Active managers in particular 
should evaluate fee increases for ESG aligned products, 
particularly as the underlying investment performance is 
structurally intended to provide strong returns and at the 
very least protect against downside risk. That being said, the 
direct competition from passive ESG funds will remain as a 
fee reference benchmark.
Our survey indicates that 37% of institutional investors 
are willing to pay a premium for ESG products, with the 
majority of them ready to pay between 21 and 40 bps (cf. 
exhibit 16). Given the cost sensitivity that has marked the 
AWM industry, the fact that investors are willing to accept 
higher costs attests to the high degree of investor demand 
and the attractiveness of sustainable products. That being 
said, asset managers will need to demonstrate the added 
value they provide if they would like to demand higher fees. 
A strong option would be for these managers to prove 
their purpose by undertaking a high level of proactive 
engagement with portfolio companies, leveraging on their 
positions as shareholders to ensure that they are operating 
in a sustainable manner. They would also need to provide 
operational recommendations to these firms and clearly 
report quantifiable results of said engagement with portfolio 
companies. 
2.3.3 Focus on storytelling and brand 
building
In an ever-evolving competitive environment, and with EU 
regulations defining the minimum standards of the ESG 
product, asset managers will need to clearly differentiate 
themselves through investment intelligence, rigorous 
investment processes incorporating new extensive data 
inputs as well as marketing and brand-building in order to be 
successful. 
A coherent ESG story with clear and measurable KPIs 
beyond the minimum regulatory requirements will go a 
long way to win investors’ support. This requires not only 
heightened engagement with portfolio companies, but also 
telling the story of the corporate values and how they are 
demonstrated on a day-to-day basis within the organisation 
and community. This applies also to managers who have 
always been ESG proponents, as regulations stand to erode 
the strong differentiation attained by those implementing 
ESG on a voluntary basis. As such, it is these asset 
managers’ best interests to double down on their marketing 
and storytelling in order to differentiate themselves.
Exhibit 16: Institutional investors willing to pay a premium for ESG products
Are you willing to pay more for an 
ESG product ? (Institutional Investors)
If yes, what premium are you ready to pay? (Institutional Investors)
Yes
37%
No
63%
Source: PwC Global AWM Research Centre
Equity (small-cap) Funds
Equity (large-cap) Funds
Governmental bond Funds
Non-governmental bond funds
Mixed asset Funds
1-20 bps
21-40 bps
41-60 bps
61+ bps
10%
76%
13%
30%
3%
1%
1%
2%
4%
20%
59%
9%
14%
66%
40%
56%
50%
47%

36 | 2022: The growth opportunity of the century
2.4 Tackling the ever-present ESG data 
challenge
An effective and impactful model of ESG investing is heavily 
reliant on timely and accurate data – which is a central tenet 
of benchmarking ESG performance, impact assessment 
and risk management. While the use of ESG indicators 
and KPIs has risen considerably over the years, coverage 
is inconsistent and lacks breadth for comparison between 
sectors and stocks. This represents the most serious 
constraint to greater adoption of ESG among managers.
This barrier is likely to grow in terms of granularity and the 
scope of corporates that need to be covered as upcoming 
regulations will require new data sets and processes in 
order to monitor taxonomy alignment and principal adverse 
impacts on ESG issues. Traditional ESG data and ESG 
scoring will no longer suffice. The nature of ESG data and 
the methods with which it is analysed must evolve in order 
to be able to cope with these regulatory requirements. 
Data management is already at present a core competency 
of the effective identification and management of 
investment opportunities. This core competency will 
significantly increase in relevance, as data requirements 
are more sophisticated, and the market of data providers 
is much less mature. As such, asset managers must 
take action to address the shortcomings in their data 
management processes, not only to be able to cope 
with the EU taxonomy requirements, but in order to fully 
capitalise on the opportunities presented by the surge in 
client demand for sustainable investing.
2.4.1 Asset managers must push 
underlying corporates for verifiable 
and quantitative data
The data AWMs receive from their underlying corporates 
is pivotal to their sustainable investment efforts. 
Insufficient data reported by investee companies and 
the absence of mandatory assurance on non-financial 
information is a key operational risk that asset managers 
will need to monitor. While there is no question that 
increasing demand has bolstered the prominence and 
availability of ESG and ESG data, major shortcomings 
persist. Most prominently, there is no meaningful 
consensus or standardisation of ESG metrics as of yet 
and most available data on companies’ ESG efforts 
are self-reported - raising concerns about reliability or 
“greenwashing”. 
As a result, asset managers are currently faced with a 
growing asymmetry between the information they need 
and the information with which they are provided. This is 
a major source of confusion and complication for asset 
managers when it comes to aligning their investment 
processes with EU regulations, with 73% of respondents 
in our asset manager survey citing lack of data as their 
largest challenge when implementing ESG products (cf. 
exhibit 17).
Exhibit 17: Lack of data a significant barrier to asset managers implementing ESG products 
What were your largest internal and external challenges when implementing ESG products? (Asset managers)
Lack of relevant tools/software
Lack of appropriate investment opportunities
Lack of relevant talent/expertise
Lack of data
Increased operational costs
3%
6%
35%
73%
76%
Source: PwC Global AWM Research Centre

PwC Luxembourg | 37
The lack of standardised ESG data also represents a major 
challenge to asset managers in the monitoring, assessing 
and disclosing of ESG-related risks; even as the materiality 
of these risks to investors translates to mounting pressure 
on asset managers. Self-reported data from underlying 
corporates tend to be skewed and inaccurate given the 
absence of a framework ensuring alignment.
Managers need ESG metrics to become more comparable, 
codified and aligned. This lack of alignment is commonly 
cited as a major barrier to greater ESG adoption, with 72% 
of asset managers in our survey identifying the lack of 
“objective and verifiable company level ESG metrics” as 
their main challenge. Many asset managers see increased 
regulation as a promising solution to this challenge, 
with approximately 77% of managers welcoming the 
implementation of regulatory requirements which would 
lead to improved data disclosure and transparency in their 
portfolios (cf. Exhibit 18). Envisaged NFRD amendments 
would already enhance the level of data, facilitating the 
benchmarking and integration of sustainability risk in the 
operations of all financial participants.
In the face of mounting regulation, asset managers 
should confront and align with what regulators qualify as 
“sustainable” as there may be key differences. In order to 
do so, managers must actively engage with the corporates 
in which they invest, providing oversight and guidance to 
ensure a truly sustainable order of operations. 
European asset managers have been increasingly focusing 
on Engagement and Voting as an approach to ESG, which 
ranked as the most commonly applied strategy among 
the managers we surveyed. This is a strong indicator of 
the deepening entrenchment of ESG considerations in the 
industry. Nordic institutional investors are, for example, 
demanding concrete measures from their underlying 
corporates. It is no longer sufficient to say, “we engage”, 
managers must demonstrate the influence they have on 
underlying corporates and the results this has achieved.
In short, the burden has fallen on asset managers to assure 
that their underlying corporates are being transparent and 
accurate in their ESG reporting. They must take an active 
role in engaging with these corporates to ensure that they 
are acting in a sustainable manner.
Exhibit 18: Asset managers welcome increased regulation 
Given that lack of data is often cited as a challenge for setting 
up ESG products, do you want more regulatory requirements 
in terms of regulatory reporting in the companies in wich you 
invest? (asset managers)
Which type of data posed the largest challenge? 
(asset managers)
Yes
77%
No
23%
Source: PwC Global AWM Market Research Centre
Objective and verifiable 
company level ESG 
metrics (non-financial 
reporting)
Comparable ESG 
investment performance 
data
72%
28%
ESG information must be viewed with as much 
importance as financial information. The time has come 
for corporates to deliver up to date ESG data in an 
accessible, digital manner. This data must ideally be 
centralised and accessible to stakeholders- meaning asset 
investors and data providers.
Major European Asset Manager

38 | 2022: The growth opportunity of the century
2.4.2 To overcome the ESG data hurdle, managers must digitise
In order to overcome the aforementioned challenges 
related to ESG data and align their products and 
services with the requirements set out by the EU as 
well as meeting investor expectations, asset managers 
should leverage on technology and digitisation. 
The use of a range of smart technologies has the 
capability to take ESG to the next level. Natural 
Language Processing (NLP), machine-learning 
and blockchain automatically extract ESG data 
on corporates, allowing managers to quantify the 
sustainability impacts of potential investments. 
Similarly, indirect data sourcing represents another 
significant option for asset managers, on which many 
managers have begun to leverage in order to gain a 
competitive edge. Indeed, of the 200 asset managers 
that we surveyed, 87% were collaborating with external 
data providers; with only 13% in-housing their data 
management operations (cf. Exhibit 19). 
This reliance on smart technologies and external data 
providers is set to increase in the future, with over half 
of respondents in BNP Paribas’ ESG survey planning to 
contract such providers and 37% planning to acquire 
new machine learning systems in support of ESG up 
until end-2021.
If properly integrated, these new technologies and data 
providers could soon redefine the industry, supporting 
asset managers in integrating ESG considerations into 
the investment process and allowing them to have 
a highly differentiated Sustainable Value Creation 
offering. Managers could also benefit from digitisation 
and indirect data sourcing as a way of monitoring and 
evaluating ESG-related risks on an ongoing basis, as 
well as assessing data obtained from their underlying 
companies to prop up their efforts to appropriately alter 
their risk management procedures.
Exhibit 19: Managers are already taking action to overcome the data challenge  
Planned technological advances in coming 2 years
Which of the following ESG data providers 
do you use? (Asset managers)
Contract third-party technology 
partners in support of ESG 
investing
Acquire new machine learning/
AI systems in support of ESG 
investing
Develop in-house proprietary 
systems
Non of the above
52%
37%
24%
9%
Sources: PwC Global AWM Research Centre, BNP Paribas ESG Global Survey 2019
Vigeo Eiris
Bloomberg Sustainanble Finance
FTSE Russell
In-house data management
Arabesque
SENSEFOLIO
TruValue Labs
MSCI-IVA
ISS-Oekom
Refinitiv
IdealRatings
REPrisk
RobecoSAM
Sustainalytics
CSRHUB
Trucost
7%
9%
10%
11%
12%
12%
13%
13%
13%
14%
14%
15%
15%
15%
16%
17%

PwC Luxembourg | 39
As the regulatory environment rigidifies, EU managers 
and managers of EU products will be required to modify 
their risk management frameworks to incorporate 
ESG and non-financial risk. This extends to all asset 
managers, regardless of the strategy they choose or 
category they launch their funds under. The SFDR 
mandates that all products will need to be assessed and 
monitored for any potential ESG risks – even if they do 
not explicitly promote ESG features. 
ESG-related risks for asset managers can stem either 
indirectly, through non-compliance of underlying 
corporates; or directly, from their own operations. 
Either one of these put the asset manager at risk of 
reputational damage and related financial implications. It 
is therefore pertinent that, regardless of the sustainability 
approach, asset managers develop in-house expertise 
on ESG risk identification and management in order to 
regulate the dissemination of knowledge and monitor 
compliance in their own operations and as well as 
double down on underlying corporate engagement.  
Managing ESG-related risk would also mean that 
asset managers would have to consistently monitor 
their portfolios and regularly disclose whatever ESG 
exposures they may have.
Managers should consider boosting engagement with 
their investee companies in order to quantify the ESG 
metrics of their business strategies and operations 
and make necessary recommendations on how these 
companies can change business practices to mitigate 
possible ESG-related risks. They can also enforce 
ownership rights through proxy voting as a way of 
influencing underlying corporates. For those that decide 
to become fully sustainable asset managers, they would 
need to employ stricter risk management practices; 
going beyond widely used negative screening methods 
and incorporating other methods such as norms-based 
screening, which involves assessing each potential 
investment against their performance in specific ESG 
measures. They would also need to embark on more 
intensive corporate engagement with underlying 
companies.
2.5 Develop a strong ESG risk management process
Risk management in relation to 
ESG issues should have been 
integrated some time ago. 
These risks are dually material, 
both in terms of corporate risk 
and externalities.
Major European Asset Manager

40 | 2022: The growth opportunity of the century
As ESG becomes increasingly entrenched in the 
investment landscape and society grows increasingly 
ESG-conscious, the investor base is attributing 
increased importance to sustainability and the quality 
of ESG data. Similarly, EU regulators are increasingly 
focusing on the ESG reporting provided by managers, 
with the Action Plan aiming to increase transparency 
and disclosure. As a result, asset managers that take a 
strong stance on implementing and reporting on their 
ESG metrics stand to be the biggest winners in this new 
landscape, complying with mounting regulations and 
attracting an increasingly ESG-oriented investor base. 
However, managers are struggling to provide their 
investors with accurate ESG data, often suffering from 
the same shortcomings mentioned above. Investors 
are having to synthesise and interpret a growing 
array of information: including a multitude of national 
requirements, private sector initiatives and voluntary 
ESG principles. For many investors, this lack of ESG 
comparability represents a significant barrier to adopting 
ESG into their portfolios. In fact, 89% of the institutional 
investors we surveyed stated that they want more 
regulatory requirements in terms of regulatory reporting 
for their ESG investments from the asset managers with 
which they invest (cf. Exhibit 20).
Data inconsistencies and shortcomings represent a 
similar challenge within the retail segment, limiting 
the uptake of ESG investment. In our survey of over 
800 retail investors, over one third of those who do 
not consider ESG factors in their investments cited 
ambiguities surrounding the objective evaluation of the 
ESG impact on investments as their reason for not doing 
so.
Those asset managers who are able to provide collect, 
evaluate and report on accurate ESG-related data and 
impact are set to win the confidence of ESG-oriented 
investors and will attract more inflows into their products 
as a result. Sustainable asset managers will need to 
ensure that they are reporting above the regulatory ESG 
reporting requirements in order to stand out and build 
long-term trust with investors.
2.6 Going beyond the minimum reporting 
requirements
Reasons retail investors do not consider ESG 
investments
Have you already set up a strategy 
to align your portfolios with the 
environmental characteristics of the 
EU taxonomy? (Asset managers)
Do you want more regulatory 
requirements in terms of regulatory 
reporting for you ESG investments from 
the asset managers you invest with? 
(Institutional investors)
Don’t want to
No options available to me
Doesn’t fit may objectives
Lack of information and 
understanding of these types of 
products
Cannot objectively evaluate the 
ESG impact on investments
Other
Lack of compelling evidence to 
support that financial returns 
from ESG products is close...
6%
6%
11%
14%
34%
9%
20%
Exhibit 20: Investors welcome heightened regulatory reporting  
Yes
85%
Yes
89%
No
15%
No
11%
Source: PwC Global AWM Research Centre

PwC Luxembourg | 41
Pension funds are required to consider 
ESG risks in all of their investments and 
thus there is a natural demand to work 
with asset managers that provide this 
information for the investments that the 
pension funds make.
European Pension Fund

42 | 2022: The growth opportunity of the century
2.7 Educating the investment community and your staff 
2.7.1 ESG education will be key in growing the asset pool
Fostering ESG education will accelerate the systemic 
considerations of ESG risks and raise demand for 
sustainable products. Investment managers can play a 
key role in the dissemination of knowledge on ESG issues. 
Not only can they educate their own workforce on how 
to incorporate ESG, but they can educate the investment 
community on the benefits and importance of sustainable 
finance. 
Paramount to these efforts is the education of retail investors 
– streamlining the transition to a sustainability-centered 
manner of investing. Retail investors represent a growing 
portion of European ESG assets, and it is in the best 
interests of overall society if this segment is fully “clued up” 
on the importance and benefits of ESG investment.
Once investors are “confronted” with sustainability 
requirements at the level of the MiFID suitability procedures 
or the fiduciary duties stemming from Solvency II and IORP 
II, they will become more aware of the importance of ESG 
and the opportunities presented by it, it is likely that we 
would see a strong acceleration of ESG asset growth. Our 
retail investors highlights this, with 86% of respondents 
stating that having more knowledge/information on ESG 
products would make them increase their allocation to these 
products (cf. Exhibit 21).
However, as a B2B2C industry, asset managers are not 
directly in contact with end investors. As a result, the 
responsibility falls to those who select and distribute funds 
to play a role in educating these investors on the benefits 
of ESG investing and how it can bring about a societal 
difference. Within the AM industry, trade associations can 
also play a key role in providing information and education to 
end-investors. Asset managers should inform and educate 
fund distributors and fund selectors, who would in turn pass 
on that education to retail investors.
Moreover, asset managers must consider using their 
expertise to educate underlying corporates on the important 
and urgent nature of ESG. In hosting webinars, lectures, 
or simply engaging with their underlying corporates as 
mentioned above, asset managers could benefit from 
improved corporate reporting while simultaneously building 
a better future. 
Would having more knowledge/information on ESG products 
make you increase your allocation to them? (Retail investors)
Exhibit 21: Majority of retail investors believe improved 
ESG education would cause them to invest sustainably  
Source: PwC Global AWM Research Centre
Yes
86%
No
14%
Without a doubt, there’s a 
war for talent out there when 
it comes to ESG specialists. 
But at the same time, 
competition is fierce among 
candidates wanting ESG 
roles.
Michael Baldinger, 
Head of Sustainable & Impact 
Investing, UBS Asset Management

PwC Luxembourg | 43
2.7.2 Upskilling staff will create ESG leaders
The need for, and opportunities presented by, ESG 
education do not pertain solely to investors. As ESG 
becomes increasingly entrenched in the industry, and 
becomes increasingly demanded by investors, a deeper 
knowledge and understanding of it needs to be ingrained 
within the asset management workforce. In order to make 
the transition towards a sustainable investment landscape 
and integrate ESG capabilities across organisations, asset 
managers need to build a diverse and ESG educated 
talent pool to offer fresh perspectives. To attain a future-
proof workforce, asset managers must also reflect the 
diversity which they expect from the corporates in which 
they invest.
As such, an ESG & sustainability trained workforce will be 
increasingly required across the value chain, and different 
pedagogical goals must be considered as a result. It is 
pivotal for asset managers to build a talent pool to offer 
perspectives on ESG integration. This workforce will need 
to be skilled in ESG data and analytics, ESG risk analysis, 
ESG impact analysis and ESG policy monitoring.
Asset managers must seek to hire candidates with both 
financial experience and a passion for issues relating to 
ESG. However, competition for such skilled workers is 
limited. 35% of asset managers we surveyed cited a lack 
of ESG talent/expertise as the largest internal challenge 
preventing them from implementing ESG products. As 
such, upskilling current investment staff and management 
in relation to governance, risks, and general awareness 
on ESG principles is a compelling tactical answer for 
institutions and their business partners to overcome this 
challenge.
A broader range of knowledge within an organisation can 
help investment teams to make decisions on ESG-related 
matters, filling a gap that traditional investors, even armed 
with considerable amounts of data, cannot. Companies 
should pick up the pace in order to formulate the right 
structure and leadership, as well as attain the skills 
necessary to foster greater ESG expertise. Companies 
should also embed core values and follow up their 
commitment to ESG with action and pragmatism.

44 | 2022: The growth opportunity of the century
The ESG wave is fast approaching. Public awareness 
of ESG related risks, increased regulatory scrutiny and 
major demographic and societal changes are pushing 
ESG investing to the top of the asset management 
agenda. The combination of these trends has brought 
the European asset and wealth management industry to 
the brink of an imminent paradigm shift. Managers must 
anticipate and adapt to this new reality, taking a number 
of actions to integrate ESG into everything they do - from 
implementing sustainability into their product offering, to 
reengineering the very way they do business. 
We expect that the AWM industry of tomorrow will be 
nearly unrecognisable from that of today, with ESG 
considerations becoming the new standard for investing. 
While barriers remain, regulators, investors and asset 
managers alike are uniting in overcoming these hurdles, 
as both regulators and investors continue the push for 
a sustainable investment strategy, and asset managers 
shift their operations to meet this demand.
This shift represents a once-in-a-century opportunity 
– not only for the AWM industry, but for the future 
development of the overall European continent. As 
global capital becomes increasingly channelled towards 
sustainable projects, Europe is well positioned to 
act as the global ESG hub – creating new jobs and 
opportunities and thus increasing the prosperity of its 
population. 
Conclusion

PwC Luxembourg | 45
If you would like to discuss any of the issues raised in this Report in more detail, 
please speak with your usual PwC contacts or anyone listed below.
Steven Libby
Partner, EMEA Asset and Wealth 
Management (AWM) Leader
PwC Luxembourg
steven.libby@lu.pwc.com
+352 49 48 48 2116
Olivier Carré
Partner, Financial Services Market 
Leader
PwC Luxembourg
olivier.carre@lu.pwc.com
+352 49 48 48 4174
Nathalie Dogniez
Partner, Global/EMEA AWM  
 
ESG Leader
PwC Luxembourg
nathalie.dogniez@lu.pwc.com
+352 49 48 49 2040
Dariush Yazdani
Partner, Asset Management Market 
Research Centre Leader
PwC Luxembourg
dariush.yazdani@lu.pwc.com
+352 49 48 48 2191
Olwyn Alexander
Partner, Global AWM Leader
PwC Ireland
olwyn.m.alexander@ie.pwc.com
+353 (0) 1 792 8719
Ullrich Hartmann
EMEA FS ESG Leader
PwC Germany
ullrich.hartmann@pwc.com
+49 69 95852115
Gema Maria Ramos
AWM Leader
PwC Spain
gema.ramos@pwc.com
+34 659 04 15 41
Patrick Heisen
AWM Leader
PwC Netherlands
patrick.heisen@pwc.com
+31 88 792 5970
Jean Sebastien Lassonde
AWM Leader
PwC Switzerland 
jean.sebastien.lassonde@pwc.ch
+41 58 792 81 46
Elizabeth Stone
AWM Leader
PwC UK 
elizabeth.j.stone@pwc.com
+44 7725 070068
Mike Byrne
AWM Leader 
PwC Channel Islands
michael.j.byrne@pwc.com
+44 7700 838278 
Patricia Johnston
AWM Leader
PwC Ireland
patricia.x.johnston@pwc.com
+353 1 792 8814 
Daniel Algotsson
AWM Leader
PwC Sweden 
daniel.algotsson@pwc.com
+46 10 213 37 54 
Oliver Weber
AWM Leader
PwC Luxembourg
oliver.weber@pwc.com
+352 49 48 48 3175 
Gerald Gonsior
AWM Leader
PwC Germany
gerald.gonsior@pwc.com
+49 69 95853247 
Sarah Kressmann-Floquet
AWM Leader
PwC France 
sarah.kressmann-floquet@pwc.com
+33 1 56 57 82 71 
Mauro Panebianco
AWM Leader
PwC Italy 
mauro.panebianco@pwc.com
+39 02 6672 0568 
Contacts
Key contacts
Leadership 
team

46 | 2022: The growth opportunity of the century
Notes

PwC Luxembourg | 47

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