XPS finds slowdown in ESG progress among fiduciary managers

XPS finds slowdown in ESG progress among fiduciary managers

07 Jan 2026

• Only 21% of fiduciary managers were rated Green by XPS in 2025, down from 38% in 2024 – a 17% decline.
• Signatories to the Net Zero Asset Managers Initiative dropped to 36%, signalling reduced collective climate action.*
• While 57% of fiduciary managers influence voting activities, escalation from engagement to divestment remains inconsistent.
• 36% of managers do not include all ESG ratings for underlying funds in standard client reporting, limiting trustee oversight.

The latest survey of the UK FM market by XPS Group reveals a growing disconnect between sustainability rhetoric and reality, with overall ESG progress stalling across the UK fiduciary management market. The survey covers 14 fiduciary managers representing over £300bn in assets, and captures more than 90% of the market. Sustainability is widely referenced in fiduciary manager’s approaches, however implementation across the market remains inconsistent.

Climate change practices saw the sharpest decline, with fewer managers demonstrating adequate assessment of climate risks or preparation of portfolios for the transition to a low-carbon economy. This gap between rhetoric and reality increases reputational and regulatory risks for pension schemes, relying on fiduciary managers to deliver on net-zero commitments. Trustees should look beyond headline targets and ask for clear evidence of how portfolios are being stress tested and adjusted in practice.

Stewardship practices also require closer scrutiny. Although many managers say they are consistently engaging with companies, few demonstrate a structured escalation process and measurable outcomes are rare. Trustees should push for greater transparency on how engagement is escalated and must insist on clarity around these routes and voting influence to ensure accountability.

Reporting quality remains another key concern. While leading managers now offer clear dashboard-led, scheme-specific ESG reporting, quality across the market varies widely. Without comprehensive reporting, including ESG ratings for underlying funds, trustees cannot effectively monitor, challenge, or escalate.

Implication for Trustees: Trustees should move beyond high-level policy statements and actively challenge fiduciary managers to demonstrate ESG integration in practice. Tailoring ESG approaches, demanding actionable reporting, and benchmarking against market leaders are essential steps to safeguard member interests and meet regulatory expectations.

Fraser Weir, Head of FM Research, XPS Group, said: “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."

 

Notes:

The XPS Fiduciary Manager ESG Integration Survey 2025 covers over 90% of the UK fiduciary management market, with data from 14 managers representing approximately £304bn in assets. Ratings were benchmarked against prior years to identify trends and gaps. Fiduciary Managers completed a comprehensive ESG questionnaire with over 70 questions.

The rating system

XPS rates Fiduciary Managers as Green, Amber or Red based on five key areas:

1. Philosophy – Firm-level philosophy and commitment relating to ESG, stewardship and broader sustainability issues
2. Integration – Taking account of ESG risks within investment research and portfolio construction
3. Climate change – Explicit climate change considerations within the investment and stewardship processes
4. Stewardship – Approach to voting and engagement to drive positive change in invested companies and underlying managers
5. Reporting – Transparent communication of ESG activity to stakeholders

Each question is scored +1, 0 or -1, with scores weighted appropriately to inform a rating for each sub-area and an overall rating. Fiduciary Managers scoring below -0.2 are rated Red, between -0.2 and +0.7 are rated Amber, and above +0.7 are rated Green.

Any Fiduciary Manager rated Red overall on ESG cannot be recommended to clients.

 

* The Net Zero Asset Managers Initiative ceased activities in January 2025, following the withdrawal of several large US-based asset managers. This is set to relaunch in 2026.