Is ESG still relevant? What fund managers should take from the Australian Financial Review ESG Summit 2025
The 2025 AFR ESG Summit brought together corporate leaders, regulators, and stakeholders to dissect the evolving ESG landscape. While headlines questioned whether ESG is 'dead,' the consensus was clear: ESG is not disappearing, it’s maturing.
For fund managers, this presents both a challenge and an opportunity to reassess how ESG integration supports long-term investment performance and fiduciary responsibility.
Lawyer Charlotte Pratt and Law Graduate Dylan Chan from our Banking & Financial Services team attended the summit, where they heard insights from investment managers, superannuation fund leaders, and companies actively engaged in capital raising. Their top takeaways are below.
Key takeaways for fund managers
- ESG is entering its implementation era. While the hype cycle may have peaked, ESG is now embedded in regulatory frameworks and investor expectations. Fund managers must assess how portfolio companies are operationalising ESG, not just marketing it.
- ESG doesn’t just apply to company investment, but also credit and property fund managers. Is ESG considered in all aspects of investment projects and has this been disclosed to investors?
- Governance is vital. Without strong governance, environmental and social initiatives lack credibility. As investor knowledge and interest grows, investors will scrutinise board composition, succession planning, and executive accountability. This risk is high in founder-led or closely held businesses.
- Transparency is a risk mitigator. Managers that are open about ESG challenges and progress are better positioned to build trust with investors. This is shown through detailed disclosure documentation.
- Cost vs value of ESG: While ESG integration may increase short-term costs, the long-term risk of inaction includes regulatory penalties, reputational damage, and capital flights, which is far greater. Fund managers should evaluate ESG not as a cost centre but as a driver of sustainable returns. Managers should consider how these costs can be implemented and whether investors will have to pay the price.
Regulatory landscape: what investors must track
Australia's new climate-related financial disclosure regime means that by 2027, most mid-sized and large entities will be subject to mandatory reporting under Chapter 2M of the Corporations Act. Fund managers should:
- Assess portfolio readiness: Are investee companies prepared to meet disclosure obligations and maintain robust sustainability records? If called upon by companies and third-party providers, can managers provide documentation?
- Understand liability protections: Temporary modified liability settings offer limited protection for forward-looking climate statements, but these will lapse. Investors must evaluate the legal exposure of companies making or avoiding climate disclosures.
- Monitor director duties: ESG disclosures are now tied to directors’ duties of care and diligence. Misleading or incomplete statements could trigger enforcement action, impacting shareholder value.
Investment implications
Superannuation funds are leading the charge – with growing member interest in ESG aligned investments, super funds are increasingly active in proxy voting and divestment. Fund managers should anticipate higher scrutiny.
In regard to investors, retail investors may support ESG in principle but baulk at the cost. Managers must balance ESG integration with return expectations and communicate the long-term value proposition clearly. Managers that engage with retail investors must consider whether the disclosure information and investment information provided to their investors set out how ESG investments work.
What’s next for ESG investing
Emerging ESG themes include responsible AI, workforce psychosocial safety, and tax transparency. Fund managers should stay ahead of these trends to future-proof portfolios and have the potential to attract more investors as popularity in ESG continues to rise.
Investor activism is reshaping governance, with shareholder engagement influencing ASX governance principles. Managers should be prepared for increased activism and align voting strategies with ESG policies.
For fund managers, ESG is no longer a niche consideration – it’s a core component of risk management and value creation. The AFR ESG Summit 2025 made it clear: ESG is not dead, but complacency is. Now is the time to double down on due diligence, engage with portfolio companies, and ensure that ESG strategies are not only compliant but also credible and value accretive.
For more information, contact our ESG leads or Funds team.
This article was prepared with the assistance of Dylan Chan, Law Graduate
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