(Bloomberg) -- Almost all the new money that flowed into Nordea Bank Abp’s $455 billion wealth and asset management unit in the second quarter was headed for environmental, social or governance investments.

ESG accounted for 90%, or 2.4 billion euros ($2.8 billion), of second-quarter net flows, and drove funds under management to an all-time high, according to Nordea.

Snorre Storset, who heads Nordea’s asset and wealth management arm, says the bank has been bringing in more people who really understand the science behind climate change to get ahead of competitors.

“We’re hiring more experts and strengthening our teams further in this area with ESG experts in biodiversity, climate change and so on,” he said.

Demand for environmentally and socially friendly assets is forcing asset managers across the globe to revamp their operations or risk missing out on trillions in investment flows. Bloomberg Intelligence estimates that the market for ESG assets will exceed $50 trillion by 2025, more than a third the global total under management. Last month, Nordea had to cap flows into a $10 billion ESG fund as the spike in demand grew unmanageable.

But there are also signs that a lot of what’s being classified as sustainable doesn’t live up to the label. In Europe, asset managers were forced to remove the ESG tag from about $2 trillion in assets between 2018 and 2020, after the introduction of stricter regulations.

Storset says Nordea has been overhauling its asset management unit for several years with a view to focusing on sustainable investing. He’s adamant that the bank “walks the talk” when it comes to fighting greenwashing, but says others in the industry “have a lot more work to do” before they reach a “minimum level of decency.”

The U.S. recently surpassed Europe in the size of its ESG market, though that’s against a backdrop of softer regulation that gives asset managers more freedom in the classifications. Storset says Europe’s head-start in designing rules to drive away from carbon emitters means the region is ultimately ahead.

“I think European-based asset managers have an advantage here,” he said. “It has been a topic for a much longer time in Europe and even more so in the Nordics.”

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