Fund managers are about to close their books on another bumper year of ESG flows. What that means for the environment, social justice and good governance is unclear.

Hortense Bioy, the global head of sustainability research at Morningstar Inc., says she’s struck by the persistent lack of clarity around investing strategies marketed as ways to protect the planet. “When you read different commitments, different plans, it is very difficult to compare,” Bioy said in an interview. “It is a lot of guesswork.” Ultimately, though, she says investment managers are “going to be held accountable” as regulations introduced this year give investors “all the tools they need to determine if these were empty promises.”

Bioy’s job requires her to pore over portfolio data and interview fund bosses as part of an evaluation process that feeds into Morningstar’s ESG grades for clients. The work offers her a unique vantage point from which to track how those running funds plan to cut carbon emissions.

“They give you different reasons,” Bioy said, adding that she questions whether “some are more credible than others because there is no methodology today.”

But no amount of skepticism is denting the flow of cash. Morningstar data show that at the end of the third quarter, European assets under management classified as sustainable were up 134% from the end of last year. In the U.S., the increase was 40%. And U.S. managers running ESG mutual funds and exchange-traded funds have generated about $1.8 billion in fees so far this year, up from $1 billion in 2020 and $806 million in 2019, according to Morningstar.

By some estimates, the entire ESG market is worth more than $35 trillion, though Morningstar and others say the actual figure may be a fraction of that. Either way, ESG is clearly a money machine for the finance industry. Its impact on the real world, however, isn’t always easy to discern.

“Trillions of dollars have flowed in based on hope and enthusiasm, with little evidence of real-world impact or returns,” said Andrew King, professor of management at Boston University’s Questrom School of Business, who measures ESG and corporate sustainability. He said the cure is better government regulations.

That’s where 2021 has differed from previous years, as regulators started to demand more accountability amid all the ESG froth. In Europe, the Sustainable Finance Disclosure Regulation was enforced in March, and Morningstar says there are already signs that fund managers are providing more precise classifications. Categorizations such as “ESG integration,” which according to Bioy “means nothing,” are gradually being weeded out by more cautious asset managers.

The U.S. Securities and Exchange Commission has sent tremors through the fund industry by making clear it will no longer tolerate exaggerated ESG claims. Investors in DWS Group, the asset management arm of Deutsche Bank AG, are waiting to learn how an SEC probe into alleged greenwashing will end.

Bioy said part of the challenge for fund managers is that companies in their portfolios either aren’t doing enough to boost their climate and social credentials, or if they are, they don’t have the data to show it.

“Asset managers are working with what’s available,” she said. “There aren’t that many companies that have committed to net zero, there aren’t that many companies that are on the pathway to net zero. There aren’t that many green companies to start with.”

If the end goal is to do good, then a smart ESG strategy isn’t going to be enough, Bioy said. “It is holding those asset managers accountable for the claims they make, so we stop talking about greenwashing,” she said.