Environmental, Social and Governance (ESG) Market Size, Share, Growth, and Industry Analysis, By Type (Retail, Institutional), By Downstream Industry (Information Technology, Healthcare, Finance, Communication Service, Consumer Staples, Industry, Others), Regional Insights and Forecast To 2033

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ENVIRONMENTAL, SOCIAL AND GOVERNANCE (ESG) MARKET OVERVIEW

Global Environmental, Social and Governance (ESG) Market size was forecasted to be worth USD 42.3 billion in 2024, expected to achieve USD 156.5 billion by 2032 with a CAGR of 16.1% during the forecast period.

The environmental, social and governance (ESG) market has surged recently since stakeholders realized that these aspects are critical regarding sustainability and ethical performance. ESG is used to assess a company’s performance of functions like its environmental stewardship, social responsibility, or sound corporate governance standards. There is an increased customer focus on the market, and legal requirements to have increased standards of corporate governance, and the greater push for socially responsible investments. Firms with good ESG performance, or those with good ‘social licenses’, are considered to be less likely to harm the investor and customer base and are hence considered safer and sustainable, and hence many will gather around such firms. Namely, industries such as financial, IT, and consumer goods have experienced some increase in ESG operations or measures to address such issues as lower carbon foot printing, diversity, and relevant corporate governance. With increasing consciousness, ESG strategies are becoming essential for companies to integrate with regulatory benchmarks and market demand and, therefore, an imperative of the future.

COVID-19 IMPACT

Environmental, Social and Governance (ESG) Market Had a Negative Effect Due to Sustainability and Social Responsibility During COVID-19 Pandemic

The global COVID-19 pandemic has been unprecedented and staggering, with the market experiencing lower-than-anticipated demand across all regions compared to pre-pandemic levels. The sudden market growth reflected by the rise in CAGR is attributable to the market’s growth and demand returning to pre-pandemic levels.

The COVID-19 pandemic impacted the environmental, social, and governance (ESG) market share in this way Throughout the first year of the pandemic, ESG lost its focus on sustainability and social responsibility. Faced with growing recession fears, corporate ESG investment projects were downplayed, or put on hold for a later time when companies’ stability was threatened by a downturn in the global economy. Measures like lowering carbon emissions or waste were initially in the background from companies just to maintain business operation. The welfare of the employees as well as that of the community which could be embraced under social responsibility was downplayed by what was a raw need to address the health of the public. The governance practices were also not very smooth as companies had to rush through their new working model and the governance frameworks got very stretched. However, there was an increase in 2021 as organizations started to consider the role of ESG factors in organizational and market vulnerability, and there are some sectors, which still consider sustainability and social responsibility in the initiation of the recovery process. But the COVID-19 experience brought the weak position of ESG objectives during crises to the foreground, which influenced investment and strategic management.

LATEST TREND

"Integration of AI and Machine Learning Capabilities for Enhanced Performance Drives Market Growth"

One latest trend that defines the area for improvement for 2024 ESG industry is the focus on taxonomy that has been launched with the definition of the foreseen transition with an ongoing focus on nature. With environmental degradation increasingly a major concern, companies are incorporating nature into their ESG frameworks, as governments and regulators press for more robust standards surrounding biodiversity. This encompasses recent reporting frameworks such as the Task Force on Nature-Related Financial Disclosures (TNFD) an organization that seeks to quantify the effects of corporations on biologic systems. The demand from investors for incoming biomimicry innovation is also growing, there is an increasing number of funds associated with nature-based investments. Some of the global environmental goals such as deforestation prevention are national priorities and it is expected that companies will step up their initiatives to eliminate loss of biodiversity. This tendency was observed and stems from the fact that over the past decade the States, society has come to realize that environmental and social processes directly affect one another, and therefore a gradual increase in the degree of sustainable, nature-oriented management of economic activity is observed.

ENVIRONMENTAL, SOCIAL AND GOVERNANCE (ESG) MARKET SEGMENTATION

By Type

Based on type, the global market can be categorized into retail, institutional

• Retail: Retail is one of the segments in the environmental, social, and governance (ESG) market, which covers companies that supplied products or services directly to ordinary consumers, using internet channels or stores. ESG considerations are steadily becoming a part of the consumer products portfolio of retail sectors, from sustainable products to those made from ‘clean’ sources. This sector is affected by the consumer consciousness on aspects like, quality, traceability, and corporate-social responsibility. Stakeholders are concerned with graphics and implementing sustainability throughout design and make, procurement and business-client relations.

• Institutional: The last segment of institutional concerned with corporate, government, and investment institutions working on ESG integration in business and investments chains. This category also comprises the asset managers, institutional investors, who analyze prospective investment options based on ESG factors. A lot of the initiative in the creation of new ESG standards tends to come from institutional investors because they are large, have significant purchasing power, and are capable of shaping markets, rules and international policies and frameworks.

By Application

Based on by application, the global market can be categorized into information technology, healthcare, finance, communication service, consumer staples, industry, others

• Information Technology: The environmental, social, and governance (ESG) market information technology (IT) sector mainly revolves around technological industries and their part in the triple bottom line. There is need for IT firms to embrace modern green technologies as well as governance solutions. For instance, cloud computing firms are aiming at minimizing carbon footprint by developing efficient data centers. The sector also includes data protection, Information security, and technology fairness.

• Healthcare: In the healthcare industry, they identify, enhance, and protect patient’s well-being in relation to ESG principles of sourcing materials in the wrong way. They deal with green health, products’ re-cycling in medical facilities, and ethical issues affecting patients. The other forms of strategies that are associated with healthcare ESG are funding in health through provision, and fair distribution/delivery of healthcare throughout the society particularly to the needy areas.

• Finance: Finance sector must deal with ESG more often as more attention is paid to sustainable investing, risks, and disclosure. More so, investors often analyze firms with reference to their environmental sustainability, social accountability, and operations’ governance structures so-called, ESG scores and metrics; banks and other lending organizations have also started to focus on the responsible lending and green and sustainable financing.

• Communication Service: It consists of the telecommunication media and entertainment industries that aim to assess the impact of ESG factors on their business. It has become prevalent for firms to observe on low carbon emission, workers’ welfare, and endorsing materials that uphold the virtues of right social justice. They also discuss staples of accessibility to digital technologies, protection of privacy, or guaranteeing ethical uses of communication channels.

• Consumer Staples: Consumer sector companies including food and beverage and home essential goods have started implementing ESG to reduce effects on environment and enhance social responsibilities. They here include sustainability of raw materials, avoiding use of a lot of packaging material and promoting quality working conditions. Today’s consumer wants an ethical product, meaning that consumer staples brands have moved up their sleeves in displaying their ESG initiatives.

• Industry: In industry, it deals with emissions, wastes and the conditions under which employees are subjected to work. There is an increasing use of energy-efficient technologies, environmentally friendly production processes and supply chain management. The sector is also focusing on the shift away from linear economy models and reducing detrimental impact of environmental applications.

• Others: Other sector is consisted by the companies that are not belong to the major categories specified above, but also implement ESG factors. Such fields as transportation, construction and real estate and agricultural value addition are some of the fields that may involve the use of land. All these sectors then implement ESG based on sectorial sustainability objectives such as decreased emissions in transportation or environmentally friendly farming practices in agriculture.

MARKET DYNAMICS

"Market dynamics include driving and restraining factors, opportunities and challenges stating the market conditions."

Driving Factors

"Regulatory Pressure and Policy Development Boost the Market"

One driving factors in the environmental, social, and governance (ESG) market growth is rising regulation and the emergence of policies, both national and global. The governments and regulating authorities are implementing strict rules and regulations even the European Union has made the Corporate Sustainability Reporting Directive (CSRD) obligatory for enterprises to report concerning ESG. The extent of ESG regulation presented here demonstrates the pressurization of companies to utilize ESG for meeting legal requirements, managing risk, and avoiding fine and legal substantiation. Furthermore, climate change and social equity indicators are increasingly becoming significant global problems and regulations are emerging to enhance sustainability and force states and companies to integrate sustainable ESG factors.

"Shift in Consumer Preferences Expand the Market"

The other influential factor is the changing customer values making consumers more conscious about the type of products and services that they purchase. Many customers and especially the young people the millennials and gens Z are much more likely to support brands that are environmentally conscious, socially responsible and have high levels of governance transparency. Such modifications are compelling organizations to adapt their strategies to the ESG model in a bid to appeal to Customers. Business organizations that sometime ago may have been able to produce sub-standard products and make outrageous profits today risk losing their consumers who now seek to associate themselves only with brands that can support positive change through responsible sourcing, transparency, and engagement in societal issues.

Restraining Factor

"Lack of Standardized ESG Metrics Impede Market Growth"

One of the most significant limitations that affect the growth of the environmental, social, and governance (ESG) market is a small number of professionally developed and approved concrete ESG measurements and reporting standards, which makes the data disclosed by the firms’ outliers. Various established indexes employed by different industries and regions produce measurements that are also inconsistent and allow for no straightforward evaluation of the actual extent of corporate sustainability. This can hamper the wider implementation of ESG metrics as organizations will not know which ones are most relevant or key to measure. That is why the lack of unified benchmarks can lead for so called ‘greenwashing,’ when companies manipulate their image to look more environmentally friendly.

Opportunity

"Increased Investment in Green Technologies Create Opportunity for The Product in The Market"

The market expansion breakthrough in ESG investment comes in the increasing spending in green technologies and sustainable products. With governments and corporations striving for carbon neutrality and responding to climate change, there is increased capital expenditure on clean energy, electric vehicles, sustainable agriculture, and efficient waste management systems products. This opens market prospects for those providing unique ESG services, creating value for brand, clients, and stockholders and for those investors who seek a healthy balance and want to invest in sustainable development. The transition to green technologies is in line with global environmental standards, which will persistently propel the demand for more ESG associated goods and services.

Challenge

"Balancing Profitability with ESG Goals Could Be a Potential Challenge for Consumers"

One of the main issues that companies are experiencing in the environmental, social, and governance (ESG) market today is the lack of perfect information on how one can make good profits yet maintain sustainability. Many businesses are compelled to make ESG reforms but may shy away from investing in what it takes to make such an organizational change that accedes to the pull by sinking capital into pursuits like installing energy-efficient systems or promoting fair working conditions to employees hired from suppliers. This is especially the case for SMEs as they struggle to dedicate funds into massive ESG plans and initiatives. One of the most pressing issues is still the conflict between pursuing long-term sustainability and ESG strategies on the one hand and short-term financial metrics, on the other.

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ENVIRONMENTAL, SOCIAL AND GOVERNANCE (ESG) MARKET REGIONAL INSIGHTS

• North America

North America is an important region for the United States environmental, social, and governance (ESG) market since the United States and Canada are heavily investing in and enforcing ESG standards. Netscribes reports that the SEC guidelines on climate-related disclosures, which are mandatory across the United States of America, and Canada’s rigorous carbon-cutting emission targets have advanced the ESG movement. Currently, the region hosts many large multinational firms, which are already evolving as premier models in sustainability. Consumers have also become more vocal on what they expect from ethical concerns especially in technological sectors, energy, and the financial sectors. Because of the rising demand for responsible investment, North America continues to lead in ESG investment and changes in corporate governance.

• Europe

Currently, Europe is the largest market for ESG with EU in the forefront of setting standards for the global market of sustainable investments. EU has developed extensive rules, e.g., The CSRD directive for firms to report on sustainable development and the EU taxonomy for sustainable economic initiatives. Moreover, Europe’s investors are the most advanced in implementing the principles of sustainable investment, while European enterprises are actively implementing sustainable development principles into their management systems. The global zero emission target by 2050, proclamations of climate neutrality across European countries, and Europe’s strong stances in sustainable sectors such as green energy and sustainable financing have placed the region as a forerunner in ESG strategies.

• Asia

Asia is steadily becoming important in the environmental, social, and governance (ESG) market due to government regulation and growing corporation consciousness. Japan, China, and South Korea are making an emphasis in the sustainable development goals, with national plans to decrease the carbon footprint and move to cleaner energy sources. The COVID-19 pandemic has prompted companies across sectors to undergo rapid transformation towards green investing, and China has set a new, ambitious goal to reach ‘net zero emissions’ by 2060. Japan has also started adopting to the implementation of ESG in its corporate governance system. Nevertheless, the region still has the problem of the lack of better standardization of ESG legal frameworks and different ESG engagement from corporations within the region; however, investors are increasingly demanding better corporate reporting on sustainability.

KEY INDUSTRY PLAYERS

"Key Industry Players Shaping the Market Through Innovation and Market Expansion"

Key industry players in the environmental, social, and governance (ESG) market consist of large multinationals like BlackRock, Vanguard, State Street Global Advisors majorly driving the ESG investment change and portfolio enhancement through integration of ESG factors. Some examples of these firms include. These firms have been useful in the demand for better ESG reports and engaging firms on how they should operate through shareholder proposals. All these providers are very important as well MSCI and Sustainalytics, providing ESG ratings and analytics that can be used to evaluate companies’ sustainability outcomes. They are the more rigorous MNEs which embrace environmental sustenance; integrity labor practices, and sound governance structure, such as Unilever, Tesla, Patagoning, among others. In addition, both Bloomberg and Refinitiv, offer the tools and information investors and corporations need to determine and monitor ESG scores and effectiveness. Many of them combine to create the fabric of ESG throughout sectors and geographies worldwide.

List Of Top Environmental, social and governance (ESG) market Companies

• Zotac (Hong Kong​)
• ASUS (Taiwan)
• Nvidia (U.S.)
• EVGA (U.S.)

KEY INDUSTRY DEVELOPMENT

November 2024: Notable is the developing emphasis on biodiversity as a part of ESG techniques. Companies are aligning their practices with the Task Force on Nature-related Financial Disclosures (TNFD) and getting ready for tremendous international agreements, which include the COP28 conference’s nature-associated goals. Additionally, ESG has won traction in private corporations due to rules on oblique emissions, especially with Scope 3 emissions legal guidelines from California and the EU. These shifts imply a broader understanding that sustainability is integral to commercial enterprise fashions.

REPORT COVERAGE

The environmental, social, and governance (ESG) market has seen rapid increase and transformation, driven via growing regulatory requirements, purchaser demand for moral business practices, and a shift toward sustainable funding. As governments worldwide implement extra stringent ESG-related policies, organizations are integrating sustainability and governance into their center operations. While demanding situations continue to be, inclusive of the need for standardized reporting frameworks and balancing profitability with sustainability, the market affords vast possibilities, especially in green technology and responsible funding. Leading players, together with asset managers like BlackRock and groups such as Unilever, are setting enterprise requirements. With developing emphasis on biodiversity, weather movement, and social obligation, the environmental, social, and governance (ESG) market is poised for persisted growth. As investors and purchasers prioritize moral practices, the ESG framework is turning into critical to commercial enterprise strategy and lengthy-time period increase.