Isio, a UK provider of consulting, pensions administration, investment and wealth advisory services, has released a new survey showing that almost all asset managers have an established ESG policy in place.

Asset managers continue to raise the bar on sustainable investing, despite the recent ESG backlash in the US, according to the latest findings from Isio's Sustainable Investment Survey.

The survey reviewed more than 140 funds from about 65 UK-based asset managers. Isio found that 97 per cent of asset managers have an established ESG policy and sustainability teams in place, despite high-profile withdrawals from climate initiatives and concerns over fund labelling.

Isio’s research evaluates ESG integration across asset classes, exploring developments in investment approach, risk management, stewardship, reporting and collaboration, using its proprietary Sustainability Integration Assessments (SIAs). It found continued strong progress at firm level, but some inconsistencies in how ESG is embedded, evidenced and disclosed at fund level.

The findings are timely with the UK Department for Business and Trade currently consulting on draft UK Sustainability Reporting Standards, which closes next month.

Political pressures prompt exits from sustainability initiatives
Isio found that overall levels of ESG integration remain strong at firm level with more asset managers committing to the UK Stewardship Code (69 per cent in 2025 versus 65 per cent in 2024) and Net Zero plans (65 per cent in 2025 versus 58 per cent in 2024). However, due to rising political pressures, particularly in the US, there have been some withdrawals from other collaborative sustainability initiatives, with signatories to the Net Zero Asset Managers Initiative (NZAMI) decreasing from 63 per cent in 2024 to 57 per cent in 2025.

Reporting improves, but gaps remain in private markets
As demand for transparent and credible ESG disclosures increases, reporting practices remain under pressure. Just over half (54 per cent) of strategies assessed provided what Isio defines as sufficient fund-level reporting. Climate-related reporting has improved, with 41 per cent of funds aligned to Taskforce on Climate-related Financial Disclosures (TCFD). Social and nature-related disclosures continue to improve with 39 per cent and 17 per cent of funds meeting the benchmark in 2025 compared with 33 per cent and 11 per cent in 2024 respectively, however there is still significant room for improvement.

These gaps are particularly evident in private markets strategies, where data limitations and methodological inconsistencies are key challenges. Despite this, real assets are among the most advanced asset classes for sustainable and impact integration, reflecting the alignment between physical infrastructure and long-term ESG goals.

Managers row back from ESG objective-setting
ESG objective-setting has declined with 39 per cent of funds assessed adopting formal ESG objectives or focus areas in 2025, down from 49 per cent last year. This retreat may reflect increased regulatory scrutiny, evolving labelling regimes and firms wanting to avoid greenwashing claims. While integration is still a core objective, the decline in forward-looking ESG ambition suggests that some managers are taking a more cautious stance in a shifting policy environment.

Stewardship and risk management continue to evolve
Isio’s survey assessed how asset managers are incorporating ESG risks within investment processes. Many are now using multiple data sources and integrating ESG factors through scorecards or climate scenario modelling, particularly in active equity and real asset strategies. Three quarters of managers are using ESG scorecards and multiple data sources, up 2 per cent from 2024, while 62 per cent are conducting climate scenario modelling, up from 49 per cent in 2024.

However, within climate scenario modelling, it is still difficult to monitor how climate tipping points and systemic risks are captured within models.

“It’s encouraging to see that progress on sustainable investing continues, even in the face of a wider ESG backlash, particularly in the US,” Cadi Thomas, head of Sustainable Investment at Isio, said. “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,” Thomas continued. “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,” Thomas added.

This has also been supported by other investment managers. Despite concerns that investors' appetite for ESG-focused investments is waning, Fannie Wurtz at French-based asset manager Amundi highlighted recently that there is still a lot of demand for it, notably in Europe. “Ninety per cent of EU institutional investors have ESG criteria in their Request for Proposal (RFP) and 30 per cent in Asia. It is paramount for EU investors,” she said.

Victoria Leggett, head of impact development at Union Bancaire Privée UBP, believes that the tide is starting to turn, adding that UBP’s Luxembourg-domiciled Biodiversity Restoration strategy has performed well this year. It is classified under Article 9 of the EU’s Sustainable Finance Disclosure Regulation (SFDR). She has seen a lot of interest in the fund from Scandinavian investors, in particular, as well as from UK and French investors. See here and here.