Institutional Investors Continue to Consider ESG Despite the Ongoing Backlash

The return of President Donald Trump to the White House has negatively impacted ESG initiatives, particularly in areas related to investment strategies, corporate regulations, and climate policies. Amid the increasing backlash against ESG, financial giants like Morgan Stanley, Goldman Sachs, and JPMorgan have chosen to distance themselves from global climate initiatives like the Net-Zero Banking Alliance.

Meanwhile, publicly listed firms like Bristol-Myers Squibb, Levi Strauss, and Pfizer are being pushed to scrap their DEI programs, objectives, and departments, with others like Meta and Amazon already scaling back/eliminating their DEI efforts.

Despite these challenges, a recent study indicates that institutional investors in private markets are still incorporating ESG in their investment strategies. According to the study’s findings, only 18% of limited partners felt climate risk had no bearing on their capital deployment strategies. This suggests that majority still view climate considerations as relevant to investment decisions.

Beyond climate risk, broader ESG reporting remains a key focus. The study found that 47% of limited partners felt general partners were doing a fair job with ESG reporting, while 38% felt general partners needed to do more to address climate change. Frida Einarson, a partner at Verdane, notes that there’s also an increasing number of limited partners (LPs) working to better understand how general partners are progressing towards decarbonization.

At the same time, focus on general partners (GPs) demonstrating value creation through responsible investment practices is growing. Cornelia Gomez, General Atlantic’s Global head of sustainability, highlights that her firm is committed to deepening collaboration with investors and exploring opportunities to drive meaningful change.

General Atlantic isn’t alone in this effort either. Agilitas Private Equity, a UK-based private equity firm, has pledged that 80% of its portfolio firms will have GHG emission reduction targets in place by 2028.

However, whether LPs will greenlight the various GP-led responsible investment initiatives remains uncertain. It doesn’t help either that reporting requirements under the EU’s Corporate Sustainability Reporting Directive are set to take effect, potentially complicating ESG integration efforts, particularly for companies without strong ESG frameworks in place.

Under the directive, large firms will be required to disclose data on the opportunities and risks arising from environmental and social issues, as well as report on the impact their activities have on individuals as well as the environment. As ESG skepticism continues to grow and regulatory pressures increase, experts advise firms to adapt their ESG strategies to better withstand the shifting landscape.

The resilience shown by a large fraction of institutional investors in the face of pushback against ESG is matched by the determination of companies like Coyuchi Inc. to integrate sustainability practices within their operations so that communities, the environment and the company benefits from their corporate undertakings.

NOTE TO INVESTORS: The latest news and updates relating to Coyuchi Inc. are available in the company’s newsroom at https://ibn.fm/COYU

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