Institutional investors stay the sustainable course

Sustainability remains one of the top priorities for institutional investors.

2 min

Sustainability remains one of the top priorities for institutional investors. Despite the challenges posed by market volatility and shifting regulatory requirements, investors are committed to integrating ESG considerations into their investment strategies. “Our latest ESG Survey highlights how investors are not just staying the course but actively starting a new phase of integration, learning to navigate with resilience and pragmatism. Instead of retreating, many institutional investors see sustainability as a risk-management tool – providing resilience in volatile markets, and as a necessity for value creation”, says Sophie Devillers, Head of Sustainable Finance at BNP Paribas’ Securities Services business.

A multi-faceted approach to sustainability

Sustainability is becoming an integral part of institutional investors’ governance and strategies, with a growing recognition of its importance in achieving long-term financial goals.  Rather than relying on a single strategy, investors are adopting a wide range of approaches that includes negative screening, best-in-class investing, active ownership, and impact investing. This diversification of ESG methodologies has enabled investors to tailor their portfolios to specific risk profiles and sustainability goals, which demonstrates the maturity of how investors approach ESG when making investment decisions.

Notably, institutional investors are integrating ESG criteria into their investment decision-making processes, progressively redirecting funds toward environmentally responsible alternatives. Portfolio decarbonisation, energy transition, social issues, and biodiversity preservation have become their key priorities, with investors seeking to drive positive change and minimise negative impacts onto the society.

In our survey, 49% of institutional investors are increasing allocations to energy transition assets, while 46% are actively divesting from carbon-intensive holdings

Sophie points.

From broad principles to targeted themes, interlinking climate, biodiversity and social dimensions

The shift from broad principles to targeted themes is another significant trend in ESG investing. Investors are moving away from generic ESG frameworks and towards more specific, actionable themes, such as energy transition, portfolio decarbonisation, biodiversity preservation, and social equity.

Climate change, biodiversity loss, and social issues were previously viewed as individual topics in the ESG investing discussions

Sophie observes.

As institutional investors have now gained a more comprehensive understanding of how these topics are connected, they are able to make more informed investment decisions to drive positive change. “For example, decarbonisation strategies are now being evaluated not just for their climate benefits but also for their implications on local communities and ecosystems”, she explains.

This thematic pivot reflects a growing recognition that ESG is not a monolith but a constellation of interconnected priorities, and a broader shift toward value-driven investing, where investors want their portfolios to make a tangible impact.

The data imperative

Data remains a persistent challenge for institutional investors despite of the significant progress made in the past years. “Inconsistent, incomplete, and non-standardised ESG data hinders effective decision-making, with 57.9% of investors citing ESG/sustainability data and research as the main challenge in our ESG Survey”, she notes. Investors are looking for more timely, transparent, and decision-useful data to disclose and fulfil various regulatory requirements, and measure the contribution and outcomes on their ESG goals.

The demand is not just for more data, but for better data, and investors are seeking solutions to support their ESG commitments and investment objectives.

Conclusion

The focus of sustainability might have changed, but institutional investors are not moving away from it. Instead, institutional investors are now refining their strategies and sharpening their focus to drive both returns and impact. Sustainability is more embedded into long-term investment decisions, supported by the growing understanding  and a deepening commitment to ESG principles. As the industry continues to evolve, investors must prioritise high-quality data, tailored ESG approaches, and collaborative efforts to achieve their sustainability goals.