Responsible investing moves from Environmental, Social, and Governance (ESG) slogans to carbon-tax reality. (Image: iStock) Nedgroup Investments’ 2025 Responsible Investment Report shows an industry making progress on climate data, but still struggling to convert that data into clear portfolio-level action. The firm’s annual Best of Breed™ fund manager climate survey found that 74% of assets under management are covered by greenhouse gas emissions measurement, while 25% of portfolios still do not measure their carbon footprint.
“Effective responsible investing requires both conviction and execution. Institutional commitment provides scale, while disciplined implementation ensures progress. Neither is sufficient in isolation. Without execution, conviction does not translate into impact, and without a clear framework, execution risks becoming indistinguishable from business as usual,” says Anél Bosman, group managing executive at Nedbank CIB (Corporate and Investment Banking).
The gap becomes sharper when targets are considered. According to the report, a significant proportion of actively managed assets still have no portfolio-level climate targets, while a smaller portion is aligned to net-zero or explicit emissions-reduction goals.
“Taken together, the data suggest that while climate data availability and disclosure have improved materially, these insights are not yet consistently translated into forward-looking targets or portfolio constraints,” the report says.
David Levinson, head of responsible investment at Nedgroup Investments, says the pressure on asset managers comes from several directions: group-level expectations, pension fund regulation, consultants and a growing need to show that ESG processes are more than a box-ticking exercise.
“As part of the broader Nedbank group, we get, and we welcome it, some top-down pressure from the organisation to guide us,” Levinson told Daily Maverick.
He says the pension fund industry is further ahead in these conversations because Regulation 28 has forced trustees and advisers to take environmental, social and governance factors more seriously. The adviser market, however, still has room to move.
“Sustainability is not two feet deep and 10 feet wide; it’s 10 feet deep and 10 feet wide,” Levinson says. “There’s a lot of cognitive overload.”
Setting targets
The next test is whether managers can move from tracking emissions to setting credible targets. Levinson says the change in the past decade has been striking.
“I started 11 or 12 years ago, when terms like net zero weren’t even part of the discussion, and now you’ll be hard pressed to find a manager that probably isn’t acutely aware of it,” he says.
The problem is that South Africa’s energy mix makes climate target-setting less straightforward than it may be for some European portfolios. Eskom’s coal-heavy grid means South African companies can carry higher carbon footprints even when management teams are trying to reduce emissions.
Levinson says the discussion is becoming more practical: “The conversation comes more now to what are the companies we invest in doing in terms of their strategy towards climate change and ultimately decarbonisation.”
That is where South Africa’s climate policy begins to bite. The report says the Climate Change Act, proclaimed in March 2025, has established the legal base for a coordinated national response. Sector emissions targets are still being finalised, but the direction is clear. National Treasury has indicated that future carbon budgets may carry penalties of up to R640 per tonne for emissions above allowable limits.
Carbon Tax Phase 2 took effect on 1 January 2026, with the headline carbon price rising to R308 per tonne of CO₂e, a 30.5% increase from 2025 levels. The report notes, however, that the system remains fairly forgiving because the 60% basic tax-free allowance has been extended to at least 2030 and offsets are expected to remain important for managing liabilities.
Preparing or dithering?
For investors, the question is whether companies are preparing for a lower-carbon economy or merely using allowances and offsets to delay harder operational decisions.
“We speak about the transitional risks of climate change,” Levinson says. “What we are seeing now is it’s becoming more reality.”
High-emitting sectors such as mining, steel, aluminium and other heavy industrial companies will come under closer scrutiny as carbon pricing and carbon budgets sharpen the cost of emissions. The investment case becomes less abstract when carbon risk can be put into monetary terms.
“As an industry, we’d like to be able to measure things, so that we can start now with more confidence to price carbon risk,” Levinson says.
The report argues that the availability of allowances and offsets makes long-term transition plans more important, not less. “From an investment perspective, this reinforces the need to distinguish between companies proactively aligning strategy, capital investment and governance with a lower-carbon economy, and those facing escalating regulatory and financial risk.”
AI dilemmas
The report also places artificial intelligence into the responsible investing debate. AI can help investors process large volumes of sustainability data, including geospatial data, corporate disclosures and supply chain information. Levinson says this is already improving the speed and usefulness of ESG analysis.
“If a company like Nedbank released a report a couple of weeks ago, you could get large language models that can go through that sustainability report, which the individual analysts would take quite a while to go through,” he says.
But AI comes with its own carbon and water bill. The report warns that data centres and their associated water and energy demands create environmental costs that must be assessed by responsible investors. It says AI should be “deployed deliberately, governed robustly, and integrated into responsible investment practices as a tool for accountability rather than abstraction”.
Levinson says the big technology companies are already showing the strain between AI growth and climate ambition.
“Anyone who follows the likes of Google or Alphabet, Microsoft, even Apple to a degree, all these big tech companies had these wonderful net-zero ambitions,” he says. “Since the advent of AI, you’ve seen them largely reverse some of those ambitions, and those curves have changed a little bit.”
He points to the report’s estimate that data centres could command almost 7% of total US power demand by 2030. Water use is another pressure point, especially in water-stressed regions.
“Data centres and their associated water and energy demands create tangible environmental externalities that must be actively assessed. Responsible investors therefore have a critical role to play in ensuring that AI-driven growth is aligned with climate objectives, rather than becoming a source of unpriced emissions and resource pressure. This includes engaging with companies on renewable energy procurement, data efficiency, governance of AI systems and transparency around lifecycle impacts,” Levinson says.
Proxy voting — putting principle into practice
Proxy voting is another area where the report pushes responsible investing from principle into practice. Passive investors cannot easily sell out of index holdings, so voting becomes one of the main tools available to influence company behaviour.
“Passive strategies can’t sell. So what’s their real power lever? One vote,” the report says.
Levinson says Nedgroup Investments has spent the past 18 months building out voting processes in its passive funds. “A lot of that responsible investment is therefore acting the way that you vote,” he says.
Bosman writes in the report that responsible investing requires more than intent. “Effective responsible investing requires both conviction and execution. Institutional commitment provides scale, while disciplined implementation ensures progress.”
The report is frank that none of this is neat. It includes sections on climate resilience, AI, social equity and even the question of whether weapons can ever fit into a sustainability framework. The defence debate, sharpened by Russia’s invasion of Ukraine, shows how quickly ethical lines can become contested when security, fiduciary duty and geopolitics collide.
For Levinson, the progress is real, but the work ahead is heavier. Responsible investing has moved beyond soft branding. The next phase is carbon budgets, voting records, AI power demand, transition plans and whether companies can prove they are preparing for a different economy rather than dressing up business as usual in greener grammar. DM