The Rise of Green Finance: How Sustainability Is Changing Investment Decisions
SUBMISSIONS
Sustainable investing has exploded worldwide as climate, social, and governance factors reshape capital markets. Today, billions of dollars flow into ESG (Environmental, Social, Governance) strategies alongside traditional analysis. Global sustainable assets are estimated in the tens of trillions: a 2022 GSIA review found about $30.3 trillion in ‘sustainable’ investments worldwide, and PwC projects ESG assets will jump from ~$18.4T in 2021 to $33.9T by 2026. This means ESG strategies could soon be 20–25% of global assets, not a niche side-project.
Key statistics paint the picture:
Global ESG assets: ~$30T in 2022, on track to $33.9T by 2026.
Sustainable debt issuance: New bonds for green/social causes reached ~$1 trillion in 2024.
Fund flows: Sustainable equity/fixed-income funds hit $3.56T AUM by end-2024.
Emerging markets: In India, cumulative green/social bonds soared to $55.9B by 2024. In the Gulf, Saudi/UAE issuances hit $16.7B in Jan–Sep 2024 (with Saudi’s PIF alone raising $8.5B via green bonds in 2022–23).
These numbers reflect how ESG investing has gone mainstream. Institutional surveys find 90% of asset managers expect ESG integration to boost returns, and 60% of large investors have already seen higher yields from ESG portfolios compared to conventional ones. In fact, three-quarters of investors now consider sustainability part of their fiduciary duty, with 72% setting ESG targets for their portfolio managers. Younger investors especially demand alignment with values. On the corporate side, roughly 90% of S&P 500 firms now publish ESG reports, and regulators worldwide are tightening disclosure rules (e.g. the EU’s SFDR, India’s new BRSR norms and climate taxonomy).
Green Bonds and Sustainable Debt Soar
A major driver has been the surge in green, social and sustainability bonds. Governments and companies are tapping debt markets to fund climate-friendly projects. In 2024, sustainable bond and loan issuances jumped 20% to a record > $1 trillion. Green bonds (specifically for environmental projects) accounted for ~58% of that volume. Europe remains a leader, but Asia-Pacific is rapidly catching up – Chinese issuance alone was about 10.6% of the global total in 2024.
Emerging markets are contributing too. India’s sustainable debt market climbed 186% from 2021 to reach $55.9B by end-2024, backed by sovereign green bonds (India issued ~$5.7B in sovereign green bonds” since 2023). In the Gulf, Saudi Arabia and the UAE led Middle East issuances; sustainable bonds hit $16.7B (Jan–Sep 2024). Notably, green Sukuk (Islamic bonds) are growing – $6.1B of them came from the Middle East in 9M 2024, making up ~35–40% of the region’s sustainable bond market. These shifts show investors worldwide are willing to fund clean energy, green infrastructure and social projects through debt.
Sustainability in Portfolio Management
Portfolio managers are taking note of ESG pressures. With evidence that ESG integration need not sacrifice returns, many managers now build sustainability into strategy. In a PwC survey, 90% of managers believed ESG boosts overall returns, and 78% of investors even say they’d pay higher fees for ESG funds. In practice, 72% of large investors now set ESG-related goals for their portfolios. However, demand still exceeds supply: 30% of institutions report difficulty finding enough high-quality ESG investment products, and 88% want asset managers to offer more ESG funds. As a result, many firms are relabeling or creating ESG versions of existing funds to meet demand.
Financial markets themselves are adapting. Major indices and exchanges now offer ESG or climate versions. Investor activism and proxy voting on environmental issues have risen. Even risk management is changing: climate risk is increasingly seen as investment risk. These trends have already influenced market prices to some extent (e.g. high-carbon firms may face higher capital costs).
Regulatory and Global Trends
Policy moves are cementing green finance’s rise. Governments and regulators worldwide are mandating climate risk disclosures and standardizing definitions. For example, the EU’s Sustainable Finance Disclosure Regulation (SFDR) and taxonomy are forcing funds to report ESG metrics, while the U.S. SEC is proposing similar climate rules. In emerging markets, India has rolled out mandatory ESG reporting (BRSR guidelines) and banking guidelines for green deposits. Such regulations aim to reduce greenwashing and increase transparency, which should further boost investor confidence.
Bottom Line: Sustainability has become a fundamental investment criterion globally. ESG-driven asset pools now rival conventional ones, green bonds are mainstream, and portfolios are increasingly managed through a sustainability lens. For finance students, understanding these shifts is crucial: capital is flowing into climate solutions and social-impact projects at an unprecedented scale, reshaping risk/return trade-offs and creating new opportunities in emerging markets like India and the Gulf as well as in developed economies.
Sources: Recent reports and analyses from PwC, the Global Sustainable Investment Alliance, FTSE Russell, Morgan Stanley, Climate Bonds Initiative and S&P Global provide the data and insights above.