The growing demand for transparency in ESG reporting is reshaping responsible investing. According to the latest Cerulli Edge – U.S. Institutional Edition, asset owners are facing increasing pressure from regulators, clients, and the public. In response, they now require asset managers to provide detailed disclosures on ESG-related activities. This shift is driving enhanced accountability across the investment industry.
Cerulli’s research indicates that 58% of institutional investors currently require or plan to require asset managers to disclose portfolio-level exposure to financially material ESG risks, as well as impact and thematic reporting. Additionally, 23% of asset owners mandate reports on ESG-related engagement activities, while another 22% intend to implement this requirement within the next two years.
“Institutional investors want to ensure ESG considerations are not just passing trend, but a fundamental part of the investment process,” said Gloria Pais, an analyst for Cerulli.
Despite these demands, significant challenges persist. According to Cerulli’s findings, 38% of asset owners report difficulty in defining ESG boundaries, particularly when distinguishing between ESG and impact investing. The lack of standardized ESG reporting guidelines creates inconsistencies across sectors, complicating the evaluation of portfolio performance.
Efforts to standardize ESG reporting frameworks are underway, yet obstacles remain. As asset owners continue to prioritize transparency, asset managers must invest in advanced reporting systems to meet these expectations. Those capable of delivering comprehensive and standardized ESG reports will be better position to attract institutional clients and maintain a competitive edge.
“Integrated ESG considerations into investment processes will not only enhance competitiveness but also ensure alignment with the values of institutional clients,” Pais added.
The push for ESG transparency extends beyond regulatory compliance and signifies a shift in investor priorities toward long-term sustainability and accountability. Asset managers who proactively adopt transparent ESG reporting practices will be well-positioned to capitalize on emerging opportunities in this evolving market.
