Asset owners say ESG returns still a barrier to adoption

illuminem summarises for you the essential news of the day, reviewed by our editorial team. Read the full piece on Responsible Investor or enjoy below:

🗞️ Driving the news: Morningstar's fifth annual Asset Owner Perspectives Survey shows ESG integration slowing after years of growth, with concern over returns remaining the leading barrier
• Eighteen percent of asset owners now apply ESG considerations to more than 75% of assets under management, down two points year on year, though still well above the 12% recorded in 2024

🔭 The context: Regional trajectories have diverged sharply
• North America rose six points to 43% on ESG integration, while Europe fell from 48% to 43%
• Asset owners simultaneously increased exposure to US assets and private markets, naming generative AI, inflation, and energy and supply chains as leading investment concerns

🌍 Why it matters for the planet: Environmental factors held up better than the rest of the framework
• 56% of respondents say they have become more material over the past year, down only two points, while social fell from 49% to 39% and governance from 54% to 45%
• That suggests climate and nature risk is being treated as a financial variable that persists regardless of political weather, even as the wider ESG label loses ground

⏭️ What's next: The convergence of North American and European integration rates at 43% marks a reversal of the pattern in which Europe led and the US lagged
• The balance between stronger US adoption and European retrenchment following regulatory simplification will help determine where sustainable capital flows next

📈 One stat: 18% of asset owners apply ESG to more than 75% of AUM, down two points from 2025 but above 12% in 2024

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