Asset Managers Strengthen Sustainable Investing Amid ESG Challenges

Although there is growing political opposition to environmental, social, and governance (ESG) principles in the United States, asset managers continue to expand sustainable investment practices, according to a new report from independent consultancy Isio. The results show that most asset managers are still committed to ESG integration across their organizations and making strides in respect to reporting, risk management, and stewardship.

Isio's 2025 Sustainable Investment Survey assessed over 140 funds managed by about 65 asset managers. The survey showed that around 97% of firms had formal ESG policies as well as specific sustainability teams. This indicates that ESG is still firmly positioned at the heart of asset managers' investment strategies, notwithstanding the political challenges.

The survey used Isio's proprietary Sustainability Integration Assessments (SIAs) of the level to which asset managers are embedding ESG across different asset classes. The SIAs looked at the investment approach, risk management processes, stewardship activities, reporting practices, and collaborative efforts. The results highlight evidence of significant progress at the firm level and that many asset managers are further embedding sustainable investment principles.

However, the report also noted inconsistencies in the application and disclosure of ESG integration at the individual fund level. Reporting quality and evidence of ESG practices varies significantly across funds, highlighting that challenges remain in achieving the type of transparency and standardisation we need. This is especially evident in private markets where disclosures are less advanced than in the public markets.

Cadi Thomas, head of sustainable investment at Isio, pointed out that sustainable investing is evolving despite the political against it, particularly in the US. She indicated that in many cases firms have continued to honour their ESG commitments, making progress with respect to risk management and reporting that underpin the sustainable investment integration decisions.

Although there are positive movements forward, Thomas acknowledged that there is still more work to do at the fund level. Climate-related reporting has progressed, but there are still pieces of information required with relation to social and nature issues that are not in place. Further, there is less formal adoption of ESG purposes by fund managers compared to recent years, which could be reflecting more caution from fund managers in adopting more formal ESG objectives amid increased scrutiny on the ESG labels that have received regulatory attention.

This report arises at a time when the UK Department for Business and Trade is in the process of reviewing the Sustainability Reporting Standards, which reflects the mounting emphasis on understandable and reliable ESG disclosures in the investment industry.

The research also considered asset management's response to several key frameworks and initiatives. There was an increase in assets managers participating in the UK Stewardship Code, which moved from 65% in 2025 to 69% in 2026, as well as an increase in firms with net zero carbon ambitions, which increased from 58% to 65%, respectively, in the same period. However, the number of firms belonging to the Net Zero Asset Managers Initiative (NZAMI) has declined from 63% in 2024 to 57% in 2025, in part due to political pressure, particularly in the US.

Isio acknowledged improvements in reporting practices, with more than 40% of funds having made TCFD-aligned disclosures, including on Scope 3 emissions - the indirect emissions associated with a company across its value chain. Nevertheless, there has been a decrease in ESG objectives being set formally at a fund level, with only 39% of funds having formal ESG objectives in 2025, down from 49% in 2024.

Thomas highlighted that, with sustainability reporting becoming on the legislative agenda, asset managers need to consider their strategies and how to deal with increasing scrutiny. Transparency and quality reporting will be essential to build up investor confidence and keep up with the ever-changing demands from the regulatory regime.

Isio was established in 2020 with the completion of the KPMG UK's Pension Practice in early 2021, which is a consultancy firm focused on pensions, investment, employee benefits, and wealth management. As a firm of this expertise offers a clear insight to the status and progress of asset managers in their effort to integrate ESG factors across their portfolios.

In conclusion, while political challenges and more regulatory scrutiny creates uncertainly about ESG investing, asset managers largely remain consistent in their points of reference, and uplift their standards with regards as they integrate sustainability principles. Further uplift in risk management and stewardship improvement and continued movement towards better reporting practices demonstrates that we are at the edge of a market that recognises the importance of sustainable investment and value creation to problem solving over the long term. Overall, the asset management community will need to establish consistency and transparency at the fund level as the sector continue to adapt to the rigourous and growing expectations of regulators, investors and society.