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EY suspects that asset managers will retain a strong focus on sustainability in the coming year, as new SDR regulation is set to improve investor confidence and reduce the risks of greenwashing.
Dan Hall, UK head of wealth and asset management at EY, said: “Despite uncertain and challenging times, wealth and asset managers cannot afford to step back from driving the necessary structural changes required for longer term success. The areas of focus for 2023 include developing ESG capabilities, driving out unnecessary costs and inefficiencies, digitising operating models and positioning for growth in an increasingly competitive international market.”
In addition, the firm expects that alternative investments will continue to grow in scale next year, as its growth trajectory this year dictates.
Tim West, UK alternatives leader at EY, added: “The alternatives market has seen gradual quarter-on-quarter increases in assets under management over 2022, and this momentum is expected to continue into 2023.
“Private equity is also expected to continue to grow next year, overtaking hedge funds as the largest alternative asset class in the near-term. Meanwhile, with interest rates still on the rise, the private credit market is expected to double in size over the next two years.”
The firm also expects ESG to grow in importance over 2023, as the ongoing rise in responsible and impact investing will continue to take hold in private markets.
According to research by EY, 26% of investors decided in 2022 not to invest with a manager because of inadequate ESG policies.
Anthony Kirby, wealth and asset management partner at EY, added: “Regarding ESG regulation, the UK’s current Sustainable Disclosure Regime (SDR) consultation is set to be a fundamental piece of regulation that will guide firms on disclosure should improve investor confidence and reduce the risks of greenwashing.
“The UK is paying attention to the corresponding measures in the EU, but also internationally in markets such as the US, Singapore, Japan and Australia. The new SDR measures are expected to be finalised in early 2023 and aim to assure consumers and investors, and improve stability within the financial ESG system.”
