Sustainable Finance Market Research, 2031
The global sustainable finance market size was valued at $3650 billion in 2021, and is projected to reach $22485.6 billion by 2031, growing at a CAGR of 20.1% from 2022 to 2031.
Sustainable finance covers a range of activities, from putting cash into green energy projects to investing in companies that demonstrate social values, such as social inclusion or good governance by having, for instance, more women on their boards. Furthermore, sustainable finance has a key role to play in the world’s transition to net zero by channeling private money into carbon-neutral projects.
Investments in businesses with sustainable practices is rapidly growing as demand for finance professionals with expertise in the sustainable finance is a rapidly growing field. In addition, sustainable finance offers cost cutting and risk mitigation along with better returns. Moreover, there is a decreased exposure to sustainability related risks. Therefore, these are some of the factors propelling the growth of the sustainable finance market. However, diversification issues of sustainable finance and its high operating costs are a major factors limiting the growth of the sustainable finance market. On the contrary, growing awareness about sustainability among various sectors is expected to provide lucrative sustainable finance market opportunity in the upcoming years.
Segment Review
The sustainable finance market is segmented on the basis of investment type, transaction type, industry vertical, and region. By investment type, the sustainable finance market is segmented into equity, fixed income, mixed allocation, and others. By transaction type, the sustainable finance market is segmented into green bond, social bond, and mixed-sustainability bond. The mixed-sustainability bond is further divided into sustainability bonds, and sustainability linked-bonds. By industry vertical, the sustainable finance market is segmented into utilities, transport and logistics, chemicals, food and beverage, government, and others. By region, it is analyzed across Europe, North America, Asia-Pacific, and LAMEA.
By transaction type, the green bond segment attained the highest growth in the sustainable finance industry. This is attributed to the fact that green bonds can deliver several benefits for both issuers and investors, an enlargement of the investor base and reputational benefits. There is also increasing evidence of pricing benefits for some issuers, driven by strong investor demand and limited supply. Furthermore the growth of the green bond market has attracted a diversified and more mainstream investor base.
Region-wise, Europe attained the highest growth in 2021. This is attributed to the fact that sustainable Fintech incorporates ESG principles into business decisions and investment strategies, covering issues from climate change to labor practices. It has become more mainstream in emerging markets in part because of pandemic-related financing needs, such as healthcare, as well as Europe’s surge in climate-related borrowing. Therefore, this is the major growth factor for the growth of the sustainable finance market in Europe.
The report focuses on growth prospects, restraints, and trends of the sustainable finance market analysis. The study provides Porter’s five forces analysis to understand the impact of various factors, such as bargaining power of suppliers, competitive intensity of competitors, threat of new entrants, threat of substitutes, and bargaining power of buyers, on the sustainable finance market.
The report analyzes the profiles of key players operating in the sustainable finance market, such as Acuity Knowledge Partners, Aspiration Partners, Inc., BNP Paribas, Deutsche Bank AG, Goldman Sachs, HSBC Group, KPMG International, NOMURA HOLDINGS, INC., PwC, Refinitiv, South Pole, Starling Bank, Stripe, Inc., Tred Earth Limited, Triodos Bank UK Ltd., Arabesque Partners, and Clarity AI. These players have adopted various strategies to increase their market penetration and strengthen their position in the sustainable finance market
COVID-19 Impact Analysis
The COVID-19 pandemic had a moderate impact on the sustainable finance market. The investors were facing huge losses during the pandemic as the market was highly volatile during the period. Moreover, investors were looking for investment opportunities, which gave high returns and projected less risk. Therefore, sustainable financing became a great option for investment as it gave better returns as compared to traditional investments. Moreover, the awareness about ESG sustainability among consumers and investors significantly impacted the sustainable finance market.
Top Impacting Factors
Rise in Investment in Businesses with Sustainable Practices
Investing in businesses and projects with sustainable ESG practices is on the rise, as the demand for finance professionals with expertise in this niche yet rapidly growing field is rapidly increasing. Furthermore, a report from February 2021, by the United Nations’ Intergovernmental Panel on Climate Change makes the urgent case for integrating ESG, among other factors, into investment decisions for fast, actionable impact on the environment. Moreover, market leaders in the space are demonstrating that thinking differently about environmental and social performance can drive change that delivers more business value while harnessing the power of enterprise to deliver better outcomes for people and the planet. Therefore, this is one of the major driving factors of the sustainable finance market.
Diversification Issues of Sustainable Finance
Green banks restrict their business transactions to those business entities who qualify screening process done by green banks. With limited number of customers, they will have a smaller base to support them. Moreover, if banks are involved in projects that are damaging the environment, they are prone to loss of their reputations. In addition, credit risks arise due to lending to those customers whose businesses are affected by the cost of pollution, changes in environmental regulations, and new requirements on emissions levels. It is higher due to probability of customer default as a result of uncalculated expenses for capital investment in production facilities, loss of market share and third-party claims. Therefore, this is a major limiting factor for the growth of the sustainable finance market outlook.
Growing Awareness of Sustainability Among Various Sectors
Sustainability is an increasingly important issue for many people, especially in the business world. For business owners, leaders, and administrators, sustainable business practices are becoming imperatives. According to NASA, it is more than 95% likely that human activity is causing the planet to get warmer. Human industry is a big part of the climate change because of its reliance on land, resources, fossil fuels, and non-stop production and consumption. Therefore, growing awareness about sustainability among various sectors is expected to propel investors to make investment in businesses, which are more sustainable and consider the ESG reliance. Therefore, this factor is anticipated to provide immense lucrative opportunities for the sustainable finance market growth of the market in upcoming years.
Key Benefits for Stakeholders
- This report provides a quantitative analysis of the market segments, estimations, and dynamics of the sustainable finance market share from 2021 to 2031 to identify the prevailing sustainable finance market opportunities.
- In-depth analysis of the sustainable finance industry segmentation assists to determine the prevailing market opportunities.
- Major countries in each region are mapped according to their revenue contribution to the global sustainable finance market forecast.
- The report includes the analysis of the regional as well as global sustainable finance market trends, key players, market segments, application areas, and market growth strategies.
Sustainable Finance Market Report Highlights
| Aspects | Details |
 By Investment Type |
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 By Transaction Type |
|
 By Industry Verticals |
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 By Region |
|
 Key Market Players | HSBC Group, Deutsche Bank AG, Pwc, BNP Paribas, Goldman Sachs, Triodos Bank, Clarity AI, KPMG International, Stripe, Acuity Knowledge Partners, Arabesque, Refinitiv, Starling Bank, South Pole, Treecard, Aspiration Partners, Inc., NOMURA HOLDINGS, INC. |
Analyst Review
Sustainable finance refers to the ways of providing funds to different projects that aim toward bringing improvement in the quality of natural resources, atmosphere, and the health of living beings by overcoming negative environmental impacts of human activities. In addition, aside from improving the environmental quality and encouraging social activities, sustainable financing also provides a healthy workforce to the economy, ensures the availability of good quality natural resources, and stimulates economic activities. Thus, the act of banks or other financial institutions to grant green finance to social or commercial sectors can accelerate and sustain the high economic growth rate. Moreover, sustainable financing includes several financial factors, such as green bonds, green loans, green securities, and green investments that can improve the environmental quality and enhance the economic development of the affiliated countries.
Furthermore, market players are adopting various strategies for enhancing their services in the market and improving customer satisfaction. For instance, in September, 2021, HSBC Bank Canada announced the launch of five new sustainable finance tools for commercial and global banking clients. These financial tools are available to the Canadian businesses of all sizes. These sustainable financial tools include green deposits, green trade finance, green revolving credit facilities, sustainability-linked loans, and green equipment financing, which were added to the HSBC’s successful green loans launched in 2019. With the new suite of sustainable finance offerings, HSBC has become the first bank in Canada to apply sustainable finance market principles to both, trade and deposit products. Therefore, such developments in the field of sustainable finance are driving the market growth. Some of the key players profiled in the report include, Acuity Knowledge Partners, Aspiration Partners, Inc., BNP Paribas, Deutsche Bank AG, Goldman Sachs, HSBC Group, KPMG International, NOMURA HOLDINGS, INC., PwC, Refinitiv, South Pole, Starling Bank, Stripe, Inc., Tred Earth Limited, Triodos Bank UK Ltd., Arabesque Partners, and Clarity AI. These players have adopted various strategies to increase their market penetration and strengthen their position in the industry.
Investments in businesses with sustainable practices is rapidly growing as demand for finance professionals with expertise in the sustainable finance is a rapidly growing field. In addition, sustainable finance offers cost cutting and risk mitigation along with better returns.
By transaction type, the green bond segment attained the highest growth in the sustainable finance industry. This is attributed to the fact that green bonds can deliver several benefits for both issuers and investors, an enlargement of the investor base and reputational benefits. There is also increasing evidence of pricing benefits for some issuers, driven by strong investor demand and limited supply. Furthermore the growth of the green bond market has attracted a diversified and more mainstream investor base.
Region-wise, Europe attained the highest growth in 2021. This is attributed to the fact that sustainable Fintech incorporates ESG principles into business decisions and investment strategies, covering issues from climate change to labor practices. It has become more mainstream in emerging markets in part because of pandemic-related financing needs, such as healthcare, as well as Europe’s surge in climate-related borrowing. Therefore, this is the major growth factor for the growth of the sustainable finance market in Europe.
The global sustainable finance market size was valued at $3,650.00 billion in 2021, and is projected to reach $22,485.56 billion by 2031, growing at a CAGR of 20.1% from 2022 to 2031.
Acuity Knowledge Partners, BNP Paribas, Deutsche Bank AG, Goldman Sachs, HSBC Group, KPMG International, PwC, and Refinitiv are the top companies to hold the market share in sustainable finance market.
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