Some asset managers are retreating from their public ESG commitments due to so-called ‘greenhushing’ suggests a report into ESG investing in private markets.
The report, ‘The State of Private Market ESG and Impact Investing in 2024’, was published by PitchBook, a market data provider for the private equity and venture capital markets.
It found that firms are no longer prioritising some of their ESG and impact investing programs for fear of a backlash from opponents of green and sustainable investment strategies or for fear of reputational damage amid claims of greenwashing.
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In terms of the relative fortunes of environmental, social and governance-themed funds respectively, most of the focus has been on environmental themes.
In contrast, social-themed funds have become less popular since the “watershed moment for DE&I” in June 29, 2023, when the US Supreme Court ruled that race-conscious affirmative action admission programs are unconstitutional.
Consequently, many any private market participants are “walking back or modifying DE&I programs in an attempt to avoid future litigation” according to PitchBook.
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The report also found that while the financial performance of ESG-committed managers varies, there is no evidence to suggest that pursuing an ESG strategy means sacrificing returns.
PitchBook’s research also found that while the regulation of ESG-related claims has been difficult to implement, there is hope that frameworks such as the EU’s SFDR will improve access to better quality data on private funds.
PitchBook also looked at impact investing in private markets and found that fundraising was much reduced in 2023 compared to the previous year.
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This is despite the fact that emerging impact managers have had a better success rate than those in the general funds market.
Unsurprisingly, climate-related strategies have dominated the impact investing market as a result of increased government and private sector support.
The report also found that fund return data “does not support the narrative that Impact investing is equivalent to concessionary returns”.
