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."
|
