Europe continues to lead in sustainable funds: as Morningstar in January 2025, Europe houses 84% of these assets, which globally reached a record high at the end of 2024 in the amount of $3.2 trillion.
Both Salimata and William have seen a growing appetite for sustainable investing in the work they do. “It’s not only about the young generation, or Gen Z,” Salimata explains. “Investors now really desire to add positive impact through their investments. It’s gone beyond selling goods and services—it’s really a new mindset that is coming into this investment universe.”
At Schroders, William says that based on the Morningstar analysis shows the peak of sustainable investing was in 2021, the same year the Sustainable Finance Disclosure Regulation (SFDR) was made a bit stricter. “It doesn’t mean the appetite is gone. The Morningstar analysis also shows a slow decline, unfortunately, due to other factors, but the good thing is we see Europe is playing a leading role in ESG investing.”
After a brief dive into definitions of sustainable investing and explanations into SFDR articles 6, 8 and 9, Salimata and William shared some of the misconceptions around sustainable investing. For Salimata, one misconception is that this type of investing is only for institutional investors: “This is not the case. Retail investors can also invest in ESG funds. And it’s not because you are investing in an ESG fund that you will sacrifice your return.”
Balancing risk and other challenges
Salimata says that ESG is less risky because it’s broader than responsible investing. For William, investors often ask for certain exclusions; at Schroders, they also use filters based on client demand for certain industries. “At Schroders, we have a firm-wide exclusion on weapons. We never invest in any defence whatsoever across the company. It was a demand from our clients, and we’ve reflected it in our sustainability investing policies,” he explains.
There are other challenges too, given the current geopolitical uncertainty, including the war in Ukraine. Such uncertainty, William explains, has caused some investors to take a much more cautious approach. “The biggest challenge we face these days are [related] to climate commitment from certain nations… evolving regulation is also very important. The rollout of SFDR in 2021 triggered a big rush to that market, but future regulation might do the opposite.”
Salimata also sees regulatory uncertainty in the sense that “different regions and countries don’t have the same approach when it comes to ESG. The EU is a leader with strict rules when it comes to disclosure, analysis. In the US, this is more politicised.”
Ultimately, she says, both institutional and retail investors shouldn’t be afraid to choose sustainable investments. “There might be short-term volatility, but the ongoing global shift towards sustainability provides strong tailwinds for those who are willing to invest in a more sustainable future.”
Listen to this episode and previous one on ALFI’s website .