ISM means Instanced Static Mesh. It’s the type of geometry that is used by the foliage tool, packed level actors, and PCG graph. It’s important (as a major optimization) when drawing large numbers of mesh instances because it allows all instances of the same mesh/material to be batched into a single draw call.
When Lumen was first announced it was explained that drawing meshes into the surface cache is extremely slow without Nanite, and it’s been confirmed by Epic that they don’t plan to support non-Nanite ISMs with Lumen. It’s a hard limitation.
If you are able to place a regular static mesh into the scene with PCG, then it should probably work. I’m not familiar enough with PCG to know whether that’s possible or how to do it though.