What Investors Should Look For In ESG And Sustainability Reporting Software

Despite intensifying anti-ESG rhetoric in the US, sustainable investing continues to expand globally. Investors are maintaining – and in many cases increasing – allocations to sustainable funds, while dialling down public positioning to mitigate reputational and political risk. Research from Morgan Stanley, for example, indicates that 86% of asset owners expect to increase allocations to sustainable funds over the next two years, up from 80% in 2024.

Yet, despite this upward trend, investors face a more complex landscape. Political scrutiny is intensifying, regulatory frameworks are shifting, and the volume and granularity of ESG and sustainability data continues to grow; manual processes and fragmented spreadsheets are no longer sufficient to support the collection of data required by regulators, limited partners and other stakeholders. Against this backdrop, investors are increasingly turning to ESG and sustainability reporting software to streamline data management, improve transparency and make strategic decisions with more confidence.

The ESG and sustainability reporting software market is crowded, with many vendors offering industry-agnostic solutions that can be tailored to individual customer needs (see Verdantix Buyer’s Guide: Sustainability Reporting And Data Management Solutions (2025)). A smaller subset of these providers has developed solutions tailored to investors’ specific needs. Demand for this specialization is clear: in our 2025 global corporate survey, over 60% of financial institutions indicated that industry-specific expertise was one of their top selecting criteria when choosing a software provider. When evaluating software, investors should prioritize industry-specific functionality such as:

1. Pre-investment due diligence screening. These tools should support risk identification, controversy screening and scenario analysis at the deal or asset level to inform decision-making.
2. Ongoing portfolio monitoring and engagement. Platforms should enable standardized data collection from portfolio companies, track performance against KPIs and facilitate structured engagement.
3. Reporting aligned to voluntary and mandatory frameworks. Solutions should streamline reporting to initiatives such as the ESG Data Convergence Initiative (EDCI) and the UN Principles for Responsible Investment (PRI), while remaining adaptable to evolving regulatory requirements.

In addition, AI capabilities are emerging as key differentiators among software solutions. Leading vendors are embedding AI across data ingestion, automated risk screening, document analysis and insight generation. For investors managing large portfolios, AI-driven automation can materially reduce reporting burdens while improving analytical depth. However, buyers should scrutinize claims carefully, distinguishing between embedded workflow automation and more advanced predictive or generative applications.

To explore the full landscape of innovation in this market, read Verdantix Smart Innovators: ESG & Sustainability Reporting Software For Investors (2026).