The responsible investment market is at a crossroads, with some institutional investors doubling down on incorporating environmental, social, and governance (ESG) considerations and others pivoting away. According to our findings, the anti-ESG movement has deterred about one in 10 asset owners from continuing to incorporate ESG considerations into investment decisions.

At the same time, asset managers who remain committed to responsible investing 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. While no asset managers polled are backing away from responsible investing, 42% tell Cerulli they will continue incorporating ESG considerations but will be cautious about messaging around responsible-investing-related activities.

As ESG issues remain a hot-button topic, Cerulli recommends that asset managers continue proactively discussing how material ESG data is used in their firms’ investment processes to avoid risk, create value, and protect returns. Investment professionals should elaborate on how they are identifying those organizations with sustainable business practices that will better position their portfolios to achieve competitive long-term investment performance.

For more on this topic, access The Cerulli Report—U.S. Responsible Investing 2024. Use this report to assess institutional and retail demand for responsible investing and access Cerulli’s outlook amid changing legislation, regulation, and more.