There is no denying that sustainable investing is not what it was a couple of years ago. In fact, we find ourselves at something of a tipping point.

For a while, the whole asset management industry seemed to be travelling in the same direction; whether joining ESG initiatives, carving out pledges or running sustainability campaigns. Some were driven by conviction, others by growing pressure from stakeholders, asset owners and peers.

As contradictory demands from political actors, regulators and asset owners creep in from both sides of the Atlantic, asset managers are having to rethink their stance.

When it comes to sustainability, it is becoming increasingly difficult to be all things to all people.

Caught between a US rock and a European hard place

Sustainability has become an increasingly politicised issue in the US. Asset managers are having to tackle the Securities and Exchange Commission’s stringent investor activism guidance, all while being under threat from Republican state officials who are pulling billions from managers deemed too keen on all things green.

In turn, we have seen managers purging references to climate change from their communications and websites, quitting climate alliances and reducing their stewardship activities, which has driven all-time low support for shareholder resolutions, according to ShareAction.

Such goings-on, however, come with a risk: namely, the possibility of eroding relationships with European asset owners whose convictions are not fading.

Research from the Principles for Responsible Investing points to a misalignment between asset owners’ and asset managers’ confidence, with asset owners demonstrating more action and ambition on sustainability and continuing to hold onto the belief that climate change is a long-term financial risk.

With that, February saw a group of 26 institutional investors worth $1.5trn urge asset managers to enhance their climate and stewardship activities or risk outflows. And, in the following months, outflows there were.

And then there is sustainability regulation in Europe

Tightening the screw on accountability and transparency, the ever-evolving sustainability regulation landscape requires increasing commitment from asset managers, making it costly to sit on the sustainability fence.

A lot of effort and resources are currently going into satisfying the ESG fund-naming guidelines issued by the European Securities and Markets Authority.

Morningstar anticipates that between 30% and 50% of EU ESG funds will have their name changed by the middle of this year, while other funds will adjust investment objectives and portfolios to avoid retreat from ESG labels.

On top of this, the introduction of the Corporate Sustainability Reporting Directive (CSRD) is leading us to another turning point, with requirements around double materiality and audit requiring the development of in-house expertise and greater investment.

Navigating a rapidly changing landscape

With all the above pressures, asset managers are finding themselves in a perfect storm. And that is without taking into consideration the tariff elephant in the middle of the room.

It is difficult to make decisions in such an unstable environment, so we have seen a lot of support for sustainable investing being turned down, and even fully muted, in recent months.

Marketing teams have been torn between saying too much, too little, yet still needing to say something meaningful on sustainability, resulting in some brand and product level campaigns being quietly shelved.

But perfect storms and tipping points are an opportunity to reflect and rethink, to carve out a stance and make a commitment (whatever that may be) and be granted a social licence from key stakeholders (whoever they may be).

As Tom Gosling of the London School of Economics argues, the array of pressures is leaving asset managers with little choice but to set out their convictions and let their clients choose according to their personal investment priorities.

Trillion-dollar growth expectations

Nevertheless, we hold onto the belief that sustainability is not merely a fad – the grass is truly greener this side of the fence, at least in the long term.

Despite seemingly never-ending pressures, shifting sentiments, and some recent performance wobbles, the core principles of ESG investing are far from fading.

The ESG investment industry is expected to grow between $35trn and $50trn by 2030 and is seeing considerable support from some of the world’s most influential investors who are looking to avoid long-term risk in their portfolios, according to the University of Chicago.

But where does that leave marketing?

As with any trend, the pendulum swings in either direction before settling into a more comfortable, sustainable rhythm (no pun intended).

There is no denying that asset managers are at a crossroads, with three roads before them.

To the left are firms choosing to stick. Their message to market must be clear and demonstrate a genuine dedication to sustainability. This is who you are, this is what you do and, most importantly, this is why you do it.

Above all else, your firm’s commitment must be steadfast and true – not forgetting demonstrable.

To the right are asset manager who twist. By choosing to step away entirely from sustainability, they will certainly face less scrutiny in the short term, but they will also create a rod for their future backs should they ever decide to venture into sustainable investing again.

Arguably, firms opting to pursue the third path will face the greatest challenge. By offering products and strategies that straddle both sides of the sustainability divide, they may find it increasingly difficult to effectively communicate why, for example, some managers can invest in oil & gas companies despite the firm being home to some award winning ESG strategies.

Who, what and, most importantly, why

Whether defined as ESG, sustainable investing, responsible investing or by any other name, it will remain a divisive issue going forward.

In truth, investors can be put into the same three buckets outlined above. Some are ESG evangelists who will only invest with likeminded asset managers. Others could not care less. Equally, there is a middle ground where investors are interested in having sustainable strategies alongside other investments.

As with almost everything in life, the answer is clear communication. With a genuine understanding of what asset managers stand for, investors will be able to make better informed choices.

If you are interested in discussing how your marketing team can play a strategic role in your company’s positioning with regard to sustainability, please don’t hesitate to get in contact.