A 17 percentage point decline in fiduciary managers rated ‘green’ on environmental, social and governance factors despite widespread references to sustainability shows a growing gap between rhetoric and reality, consultancy XPS Group has said.

The firm said there is a disconnect between “sustainability rhetoric and reality”, finding that even though sustainability is “widely referenced” in fiduciary managers’ approaches, implementation across the market is inconsistent. 

The survey suggests managers are actually regressing compared with 2024. Only 21% of 14 fiduciary managers – representing 90% of the market – were green-rated by XPS in 2025, down from 38% a year earlier. 

“The gap between ESG ambition and execution is widening. Trustees can no longer rely on statements alone – they need evidence of integration, escalation, and impact. Oversight is critical to protect schemes from regulatory and reputational risk,” warned Fraser Weir, the consultancy’s head of FM research.

He said the market is at a crossroads. The survey findings suggest FMs are struggling to deliver granular, actionable integration, with Weir attributing this in part to data and system limitations but also to “commercial pressures where ESG integration can conflict with short-term performance objectives”. 

 

US political and legal headwinds have influenced global asset managers, particularly those with large US operations, but Weir does not think that this is the only driver.  

 

“In the UK, we see additional factors such as regulatory complexity, increasing trustee governance requirements, the cost of building robust ESG systems, and differences across clients in their preferences and/or importance placed on ESG integration,” he said. 

XPS is urging trustees to actively challenge fiduciary managers to demonstrate ESG integration in practice. Weir said the intensity of trustee challenge varies; some trustees may be focused on compliance more than active oversight and escalation, and where a scheme is close to a full buy-in, trustee boards might find it difficult to change anything.  
 

“The best governed schemes are still pushing hard, demanding bespoke reporting and evidence of integration, but others risk being seen not to challenge enough,” he said. “We believe trustees should reassert their expectations, especially on climate risk and stewardship escalation, to ensure ESG integration stays away from being [no] more than a box-ticking exercise.” 

The firm rated FMs either green, amber or red based on philosophy, integration, climate change, stewardship and reporting. 

Climate change practices saw the sharpest decline, as fewer managers demonstrated “adequate assessment of climate risks or preparation of portfolios for the transition to a low-carbon economy”, XPS found. 

It said that “trustees should look beyond headline targets and ask for clear evidence of how portfolios are being stress tested and adjusted in practice”.   

Similarly, on stewardship, many managers said they are consistently engaging with companies yet “few demonstrated a structured escalation process, and measurable outcomes are rare”, according to XPS, which called on trustees to push for greater transparency on how engagement is escalated.

The varying quality of reporting was raised as a further area of concern, hampering trustees’ ability to monitor, challenge or escalate.

The FM survey follows a report by the consultancy from November which suggested a quarter of 170 investment funds by 41 managers were unable to provide a single example of how they integrated ESG factors into their decision making.