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Sustainable investing is becoming more well-established, and ESG risk factors are increasingly important considerations for investors, PitchBook’s 2023 Sustainable Investment Survey found.
The survey received responses from 814 people in five global regions. 36% of respondents were general partners (asset managers or their staff), 22% were limited partners (investors), and 10% were both. The remaining 32% held other roles, such as consultants. The survey asked respondents about impact investing, or investing with an eye to both sustainability and performance, and about how ESG risk affected their investment decisions.
Impact investing is maturing, the survey found. Only 15% of respondents said they had just started impact investing within the last year, compared with 20% who said so in 2021.
Fund managers are also fielding more questions from clients about environmental issues. More than 75% reported being asked at least some questions about sustainability, while 25% said that more than three-quarters of their clients asked about it.
ESG risk factors can sink deals. Nearly two-thirds (61%) of limited partners and 72% of general partners said they had declined to make or recommend a deal due to concerns about ESG risk—a finding in line with the 2023 BDO Private Capital Survey, which found that 80% of fund managers had backed away from a deal after ESG issues surfaced.
Assessment is still a challenge. The top challenge to sustainable investing, respondents said, was measuring its impact. 46% of respondents who made impact investments said they did’t measure the impact of those investments at all. Only 14% used standardized, external frameworks to gauge impact, while 39% used custom frameworks.
Growing negativity toward ESG. Many respondents voiced negative sentiment toward sustainability investing this year, the survey authors noted. Only one respondent expressed a strongly critical view of ESG on the open-ended question on the 2020 survey. This year, the survey received more than 60 “highly negative” responses, a reflection of how politically contentious sustainability has become.
Other findings show investors’ increasingly polarized stance toward sustainability. 37% of respondents said they had implemented sustainable investing organization-wide this year, up from 30% in 2021. But 17% said their organizations had no plans to adopt sustainable investing, almost doubling the 9% who said so in 2021.