UBS estimates the market for ESG-related information services doubles by 2025

26 Jun, 2020 23:34
source: Singularity Financial

Singularity Financial Hong Kong June 26, 2020 – UBS estimates the total addressable market (TAM) for ESG-related information services currently stands at $2.2 billion, up over a fifth from the $1.8 billion estimated by UBS in February 2019.

“ESG has come a long way since our initial deep dive last year, and while the opportunity is still in its early days, we believe growth will accelerate post Covid-19,” said the writers of the report. “Adoption of ESG and sustainable investing will continue to accelerate, with the pandemic shining a light on various areas across E, S, and G, including an emphasis on social.”

“In particular, there will likely be an increased focus on system resilience following the disruption caused by Covid-19,” they added. “As a result, we think that this places even more importance on the role of data and analytics in assessing the outlook for ESG, which should benefit information services providers.”

The firm said the largest share of the market is for ESG data and research, at $590 million, with fees associated with exchange-traded funds close behind at $540 million. Meanwhile, ESG index subscription and consulting were the next largest ESG information segments at $440 million and $300 million, respectively.

According to UBS estimates, in a best case scenario – following a strong ESG performance and greater focus on reporting standards – the ESG information services TAM could grow to $5.1 billion by 2025, implying a compound annual growth rate of 18%.

Even assuming a worst-case scenario in which ESG performs poorly and the focus on ESG reporting falls, UBS anticipates the ESG information services TAM to only dip to $2.1 billion by 2025.

UBS said that estimated spending growth from investors in the largest ESG data and research segment looked particularly “bullish” for the providers.

The upbeat view of ESG data and research spend was also generally shared across investors from the Americas, Europe, Middle East and Africa (EMEA) and Asia Pacific regions.

When it came to potential issues that could affect the adoption of further ESG data and research services, the investors ranked the performance of ESG investing as the key issue. This was ahead of lack of reporting standards, further ESG regulations, ratings and scores by ESG data firms, and cost of ESG data and research.