Regulation Consolidation, Global Alignment and Targeting Transparency: Unpacking ESG Challenges for Alternatives

Gregory Yianni and Tegan Johnson from JTC’s Sustainability and Impact Services recently attended the AIMA ‘Putting ESG into Practice’ conference in London.

Here they discuss the key takeaways from the event as well as the wider challenges for ESG and sustainability:

Q: Why did JTC find it important to attend the AIMA ‘Putting ESG into Practice’ conference?
Gregory: As a specialist in the alternative asset space, it’s vital for JTC to be present at events like this. The AIMA ESG conference brings together everyone from fund managers and legal firms to service providers—including competitors. This breadth allows us to get a pulse on global industry sentiment, hear about jurisdictional differences, and connect directly with those managing assets we want to work with. ESG themes are now baked into everything across alternatives, making it crucial for us to share and gather insights on how the sector is evolving.

Q: What stood out about industry sentiment toward ESG at the conference?
Gregory: Overall, we saw continued positivity around ESG, especially regarding its role in good governance and long-term value. However, there are some regional fault lines. For example, in the US there’s waning appetite among some investors—often for political reasons—while the EU, UK, and institutional investors continue to demand strong ESG credentials. This divergence requires asset managers with global reach to essentially develop different information sets for different markets. Despite this, underlying interest persists—even in the US. Often, it seems to be a matter of language and terminology rather than a true rejection of ESG principles.

Q: Is ESG still more of a marketing tool, or are investors embracing its substance?
Tegan: Five years ago, marketing an “Article 8 or 9” fund was novel and attractive. Today the narrative is shifting: Fund managers want to demonstrate not just compliance, but genuine belief that integrating ESG can deliver both financial returns and positive impact. So yes, some still use it for headline value, but regulation and market scrutiny are weeding out superficial approaches.

Q: Was there discussion about the practicalities and pain points of ESG regulation for alternatives?
Gregory: Absolutely. Panellists agreed that some recent steps back—such as scaling back elements of the Corporate Sustainability Reporting Directive (CSRD)—were frustrating but instructive. A major issue is regulation that doesn’t consider materiality, forcing alternatives managers to report on metrics that simply aren’t relevant, leading to poor-quality or proxy data. The sector wants simplification and harmonisation, not a complete rollback. If frameworks like SFDR and CSRD can better incorporate materiality and reduce unnecessary volume, they’ll become truly useful.

Q: Is there a risk that more regulation will just fuel box-ticking rather than real change?
Tegan: That risk is front of mind for many. The original intention of rules like SFDR was investor transparency, but the current emphasis on comparability is pushing companies to gather data for its own sake. Attendees wanted regulation that’s more targeted and proportionate, focusing on what’s truly material—so it drives better governance, not just reporting for reporting’s sake.

Q: Defence and dual-use technologies are controversial in ESG. How do managers weigh these investments now?
Gregory: This came up due to geopolitical tensions. Traditionally, weapons and tobacco have been clear “no-go” areas for sustainable funds. But with changing political realities—think defence investments post-Ukraine—some are debating whether certain types of defence can be considered sustainable. The consensus was that there needs to be top-down regulatory clarity here. Individual rationalisation won’t cut it: managers are looking to guidance from bodies like the EU Commission and UK government.

Q: Where does the UK stand after rolling out the UK Sustainability Disclosure Requirements (SDR) and the SRS?
Tegan: The new UK SRS rules, for example, will align closely with ISSB standards—akin to the global accounting standards—which is a positive step towards comparability. The government sees this as an opportunity for job creation and supporting the net-zero transition. That said, there’s still concern about divergence: truly global funds don’t want to prepare different disclosures for each jurisdiction if the underlying data are the same.

Q: What about AI in ESG data analysis—is it transformative yet?
Gregory: AI was mentioned as a useful tool, particularly for assimilating ESG data and streamlining template completion, but the real value will only emerge once data quality improves and regulatory frameworks settle. Right now, bad data in means bad data out. Firms are experimenting, but it’s not a panacea.

Q: What’s the overall outlook for ESG in alternatives right now?
Tegan: We’re in a phase of consolidation and simplification. The regulatory gold rush of the last five years is giving way to a more mature focus: businesses want ESG that’s meaningful and specific to them, not more reporting. Underlying risks and opportunities remain, but now the challenge is to build approaches that work for the long term, beyond marketing and compliance.

JTC’s Sustainability and Impact Services span advisory, regulatory compliance, outsourced reporting and our virtual Chief Sustainability Officer (vCSO) offering. To find out more please contact Gregory and Tegan directly or visit our dedicated webpage: Sustainability and Impact Services