Political pressure deters 1 in 10 US asset owners from incorporating ESG investments

Written by Adam Cadle

24/10/2024

Political pressure is now deterring around one in 10 US asset owners from continuing to incorporate ESG considerations into investment decisions and has led to institutional investors and asset managers to stop using the term ESG, latest research by Cerulli has revealed.

The asset owners stated they find responding to the backlash around ESG considerations time-consuming and costly (34%), fear litigation (24%), and feel pressure from stakeholders (14%). Comparatively, no asset managers polled are backing away from responsible investing, but 42% will be cautious about messaging around responsible investment-related activities and 4% will no longer offer responsible investment products.

Twenty per cent of asset managers and 20% of asset owners have now stopped using the term ESG. Institutional investors that are no longer using the ESG acronym have replaced the phrase with sustainable investing (50%), responsible investing (33%), and stewardship (20%).

For those institutional investors that remain committed, more than (56%) have an ESG integration process and evaluate material ESG risks and opportunities. Exactly two thirds have a distinct allocation dedicated to responsible investment products, up from 41% in 2023. Climate change, renewable energy, and water are among the top themes addressed when investing.

Meanwhile, asset managers are focusing on risk mitigation and value-enhancing benefits to investment returns and stakeholders—81% of asset managers say they are embracing ESG information to mitigate risk and 54% cite enhancing returns.

“Despite headwinds from political opponents, commitment to responsible investing remains solid,” said Michele Giuditta, director at Cerulli. “While asset managers may feel the pressure of the anti-ESG—35% state they believe the anti-ESG movement will have at least a moderate impact on their firm’s assets under management—they are still actively incorporating ESG considerations into investment decisions.”

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