Most asset managers are continuing to build on their ESG commitments, with 97 per cent having ESG policies and dedicated sustainability teams in place despite political pressure and pullback from global climate initiatives, according to Isio’s latest Sustainable Investment Survey.
The research reviewed over 140 funds from around 65 firms and found that while progress at company level is strong, what happens at fund level is still uneven. Isio’s research suggests a big difference in how clearly ESG is built into individual funds and how well it’s reported. This comes as the government prepares new sustainability reporting standards, with a consultation closing next month.
More firms are signing up to key frameworks like the UK Stewardship Code and setting Net Zero targets. This year 69 per cent signed up to the Stewardship Code and 65 per cent have Net Zero plans, an increase from last year. But the number supporting the Net Zero Asset Managers Initiative has dropped, falling from 63 to 57 per cent, likely due to political backlash in the US.
Just over half of the funds reviewed gave what Isio sees as clear and useful ESG reports. Climate reporting has improved, with 41 per cent of funds now aligned to global standards like the Taskforce on Climate-related Financial Disclosures and including Scope 3 emissions. And social and environmental reporting is getting better as well but still falls short in many cases.
The gaps are biggest in private markets where data is harder to collect and compare. But according to Isio, real assets like infrastructure continue to lead the way on ESG helped by their long-term focus and clearer links to environmental outcomes.
Meanwhile, fewer funds are now setting formal ESG goals with only 39 per cent having clear ESG objectives in 2025, down from 49 per cent last year. Isio says managers may be pulling back because of tighter regulations, shifting labelling rules and fears about being accused of greenwashing.
Risk management is improving slowly with more managers, around three quarters, using ESG scorecards and pulling data from multiple sources. Climate scenario modelling is also more common, used by 62 per cent of managers, up from just under half last year. But there are still concerns about how well these models capture long-term climate risks.
Isio head of sustainable investment Cadi Thomas says: “It’s encouraging to see that progress on sustainable investing continues, even in the face of a wider ESG backlash, particularly in the US. Most firms are holding firm on their commitments, and we’ve seen positive steps forward in areas like reporting and risk management, which are key foundations for long-term integration.
“At the same time, there’s still significant work to do at fund level. Disclosures remain inconsistent, particularly in private markets, and while climate reporting has improved, social and nature-related data continue to lag. Fewer funds are adopting formal ESG objectives, potentially driven by increasing labelling scrutiny. This shift suggests a more cautious approach, likely in response to growing regulatory pressure.
“With sustainability reporting now firmly on the Government’s agenda, now is the time to take stock and ensure strategies can stand up to increasing scrutiny.”