Environmental factors account for as little as 5% of some companies’ ESG scores, new analysis as shown, raising questions over whether sustainable funds are delivering the environmental exposure investors expect.
Analysis by Lumin VZ Group found environmental considerations were often given substantially less weight than social and governance factors within ratings used to construct ESG investment funds.
The group examined ESG ratings for 95 FTSE 100 companies and found environmental factors were the lowest-weighted component for 70 of those businesses, equivalent to almost three-quarters of those analysed.
For 76 of the companies, environmental factors represented less than one-third of the overall ESG score, while 22 of companies had an environmental weighting of 5% or less.
On average, environmental considerations accounted for around 20% of companies’ ESG scores – approximately half the weighting assigned to social and governance factors.
Jordan Donaldson, investment manager at Lumin VZ Group, said: “Sustainable investing has gone mainstream, but ESG doesn’t always mean what investors think it does.
“Many people assume it means a strong focus on the environment, but in some cases environmental factors account for as little as 5% of the overall score.”
The findings come amid continued growth in ESG investing. There are now 998 ESG funds available to UK investors, while global assets invested in ESG funds have more than tripled from $229bn (£171bn) in 2020 to $799bn in 2025, according to the analysis.
Read more: The death of lazy ESG
