Over the past few years, responsible investing has faced considerable turbulence from the so-called “ESG backlash.” It’s true: High-profile exits from climate initiatives have caused a stir, and the rise of anti-ESG rhetoric has put pressure on the use of environmental, social, and governance (ESG) criteria in guiding investment decisions, particularly in certain states.
But don’t be distracted by the noise.
Fundamentally, commitment to responsible investing practices remains strong. In fact, the practices are not only weathering the storm but gaining traction among some of the most influential players in finance: institutional investors.
Why does this matter? Institutional investors bring capital at a scale that holds real power to drive change. Where large institutions direct their dollars, the pathways for investment tend to widen, making this trend a strong indicator of sustainable finance’s enduring potential—especially if firms communicate their commitments clearly and effectively.
For market players uncertain about the substance and tactics behind such communication, an agency partner that is fluent in the language of impact and well-read in the overcorrection to the ESG “backlash,” like Gregory FCA, can be an essential ally in these times. With the right counsel, you can sharpen your narrative and reposition your brand in ways that contextualize financial returns alongside non-financial outcomes. In other words, your communications can meet the moment.
Recent Research: Commitment to Responsible Investing ‘Remains Solid’ as Impact Investing AUM Hits Record High
Two recent reports from two very different organizations — Cerulli Associates and the Global Impact Investing Network (GIIN) — are worthy of a closer look.
Cerulli Associates, a financial research firm, brings a grounded view to the landscape of responsible investing. Their recent findings reveal that even as anti-ESG pressures grew, most institutional investors held their ground. According to Cerulli, 81% of asset managers surveyed see ESG as essential to risk mitigation, while over half (54%) view it as enhancing returns.
Interestingly, only one in ten asset owners have decided to reconsider ESG commitments. This small figure underscores a key insight: The ESG backlash may have deterred a few, but it’s hardly a fundamental shift away from responsible investing.
Cerulli’s takeaways are clear – asset managers should communicate how they use material ESG data to strengthen their portfolios and support long-term performance.
Meanwhile, the GIIN’s 2024 Market Sizing Study examines the cohort of responsible investors who proactively seek positive social or environmental impact alongside financial returns, known as impact investors. The GIIN reports that impact investing now represents $1.571 trillion USD in assets under management — a total that has grown at an impressive 21% compound annual rate since 2019.
This growth is backed by a robust presence of institutional investors, including pension funds, insurance companies, and sovereign wealth funds, who increasingly prioritize impact as part of their core investment strategies. Critically, the GIIN notes: “There is growing evidence that institutional asset owners, in particular pension funds, but also insurance companies and sovereign wealth funds, are beginning to reshape their portfolios, incorporating impact-driven investments as a strategic priority.”
With this momentum, impact investing is well-positioned for sustained growth.
Communicating Effectively in Today’s Responsible Investing Landscape
With institutional commitments to responsible investing remaining strong, effective communication is essential to reinforcing confidence in this evolving space. Consider these core guidelines to sharpen your message:
Push Beyond Misconceptions
Outdated assumptions about an inherent “trade-off” between financial returns and non-financial criteria often hinder understanding. But today’s top institutional investors don’t see a trade-off. As Cerulli found, investors actually view ESG integration as a means of mitigating risk and, in some cases, even boosting returns.
The GIIN’s research also consistently supports this perspective. Communicating this shift in investor mindset can help clarify how ESG or impact-focused integrations can add strength to portfolios.
Clarify Your Goals
Miscommunication about objectives has fueled much of the backlash against ESG. To avoid mixed messages, be transparent about what you hope to achieve.
- If you’re simply hedging against investment risks with environmental, social, and governance considerations, say so. Addressing material risks is an integral part of fiduciary duty, helping investors make well-rounded decisions.
- If your strategy focuses on ‘screening out’ certain companies or practices, make that clear. Screening is an established and essential practice across public and private markets.
- If your objective is to proactively generate positive impact, explain the impact you’re aiming for and the returns you expect to achieve. Being specific about your impact goals and financial expectations allows investors to see the tangible outcomes of their commitments.
Seek Outside Perspective
For many investors, the optimal communications framing – that which aligns to the prerogatives above while authentically conveying your firm’s differentiation – is not always obvious. It often requires the outside perspective of a deeply experienced communications partner.
At Gregory FCA, we find that many clients in this space are “rebalancing” their public-facing messaging to speak effectively to the current moment. Often, they need counsel to help craft a narrative and a media strategy that will allow them to raise funds and deliver investor returns consistent with their goals, while also speaking authentically about the non-financial considerations and outcomes of their work.
No doubt – it’s challenging, especially when approached in isolation. But for responsible investors who are committed to proactively addressing the market’s changing dynamics, it often proves to be essential.
If you are interested in brainstorming about what an effective media and communications strategy might look like for your firm in this moment, I invite you to connect with me directly via LinkedIn or email: gspencer@gregoryfca.com.