Competition within the actively managed asset realm and the investment goals of young investors are driving more asset managers to consider ESG solutions, according to a survey by Cerulli Associates.

A recent survey by the Boston-based financial research firm found that 55 percent of asset managers were looking to create investment solutions that incorporate environmental, social and corporate governance (ESG) values.

One reason ESG investing is becoming more prominent in the asset management industry is that it is of more interest to younger investors who stand to inherit billions in wealth over the coming decades. A recent survey by the firm, for example, found that while less than half of U.S. households prefer ESG investing, 65 percent of investors under the age of 40 prefer it.

Investors' increasing preference for passive investments is also putting pressure on active managers, and ESG investments are one area that could help give managers an edge, according to Cerulli.

"As active asset managers fight to win assets amid increasing flows to passive products, thoughtful implementation of ESG investment principles can give active managers a valuable tool in conversations with advisors," Cerulli said in a press release.

The report added that while the ESG sector does contain passive investments, the nature of such investments—including their complexity and the subjective issues involved—make active products more attractive to investors who gravitate to this space.

"Thus, ESG products provide an area where active managers can compete with, and add value over, passive products," the firm said in its monthly product trends report.

The Cerulli report also said that, while asset managers prepare themselves for increased demand for ESG products, many are still in "wait-and-see" mode, partly because ESG mutual fund and ETF assets, as of the end of the second quarter 2018, stood at only about $108.6 billion.

Financial advisors are viewed as an important part of the equation if ESG assets are going to rise significantly, according to the report.

"The likely roadblock to more ESG factor consideration is a lack of adoption by advisors, who either do not understand the products, have misperceptions about the implementation of ESG factors, or simply do not want to change the way they’ve always done business," the report stated.