There is a “troubling pattern” of investment funds moving away from ESG commitments.
The fifth annual Investment Fund ESG Rating Review from XPS Group has revealed a “risk of stagnation” on ESG with commitment varying across the industry.
It analysed 170 funds from 41 investment managers, rating them green, amber or red based on five criteria.
It found while the number of ‘green’ ESG ratings increased slightly to 43 per cent (compared with 40 per cent in 2024), this is a slowdown in progress compared to previous years.
The report said there is a “concerning trend” at the firm level, where managers set their overall ESG strategy and climate commitments.
Funds rated ‘green’ for philosophy in this area fell to 64 per cent, down from 72 per cent in 2024 and 85 per cent in 2023.
Alex Quant, head of ESG research at XPS Group, said: “This year’s results reveal a troubling pattern of stagnation.
“While some managers continue to advance their ESG capabilities, we’re seeing a clear bifurcation in the industry, with others retreating on climate commitments and more than a quarter of funds are still unable to demonstrate evidence of basic integration of ESG risks into their investment processes.”
XPS downgraded some managers who it said lacked “strong firm-level targets on climate change” which included some which had pulled back on earlier commitments.
Quant added: “Schemes should therefore engage proactively with their managers to ensure these risks are being properly assessed and integrated, or consider whether their investments remain fit for purpose.”
tara.o’connor@ft.com
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