Pensions consultancy XPS Group has found that the number of green-rated fiduciary managers has fallen year-on-year, with climate change practices seeing the sharpest decline, according to new research.
For its Fiduciary Manager ESG Integration Survey 2025, XPS analysed data from 14 managers representing approximately £304bn in assets.
XPS Group said its findings highlight a growing disconnect between sustainability rhetoric and reality, with overall ESG progress stalling across the UK fiduciary management market.
According to XPS Group, just 21% of fiduciary managers were rated green in 2025, down from 38% in 2024. The consultancy also found that 36% of managers do not include all ESG ratings for underlying funds in standard client reporting, something they stress limits trustee oversight.
The consultancy found that while 57% of fiduciary managers influence voting activities, escalation from engagement to divestment remains inconsistent.
Speaking to IPE, Fraser Weir, head of fiduciary management research at XPS Group, said he believes the main reason ESG implementation is sliding is a result of fiduciary managers finding it harder to translate ESG philosophies into practical, portfolio-level action amidst an expectation that standards applied to fiduciary management solutions should have continued to improve.
“While most managers maintain strong ESG rhetoric and headline commitments, the challenge lies in delivering granular integration, such as linking climate targets to scenario analysis, stress testing, and asset allocation changes,” he added.
“Data limitations, system capability gaps, and commercial pressures, where ESG integration can conflict with short-term performance are all contributing factors. Improvements could be hard to achieve in 2026, particularly if international political tensions continue to escalate,” Weir said.
Signatories to the Net Zero Asset Managers (NZAM) initiative dropped to 36%, signalling reduced collective climate action, XPS Group said. The figure comes after NZAM ceased activities in January 2025, following the withdrawal of several large US-based asset managers, but is set to relaunch in 2026.
The new research comes after XPS Group said it had downgraded several asset managers last year for lacking credible firm-wide climate targets or weakening earlier commitments.
“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,” Weir said.
Implications for trustees
XPS Group said that 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. The consultancy also said that stewardship practices and reporting quality require closer scrutiny.
As such, XPS Group advised trustees to look beyond headline targets around climate change practices and ask for clear evidence of how portfolios are being stress tested and adjusted in practice, while also pushing for greater transparency on how engagement is escalated.
“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,” XPS Group said.
