Like other fund of funds firms, PineBridge Investments surveys its managers on an annual basis to gauge levels of ESG sophistication. PineBridge’s survey of 59 private fund managers – mostly in PE – found that progress was being made in pretty much all departments.

The data showed increases in the proportion of firms taking action to “support equity and advancement of under-represented groups”, and to “promote DE&I in due diligence and investment decision-making”. It also showed growth in the proportion of firms committing to international standards: 66 percent of the respondents had signed up to the UK Principles for Responsible Investment (up from 49 percent in 2021); 12 percent were reporting using SASB (up from 7 percent in 2021) and 10 percent had signed on to the UN Global Compact (versus 3 percent in 2021).

Taken as a whole, the data tells a familiar ESG story: the steps are small and the journey is long, but the embrace of ESG in private markets is growing. However, the data also hints at another familiar trend, albeit a less optimistic one for ESG fans: ambivalence in North America.

In 2022 having an ESG policy should be “table stakes” when it comes to raising LP capital, even if that policy – as a PE firm CFO once described it – is that “we don’t have a policy”. In PineBridge’s survey 20 percent of the North American respondents did not have a policy. The sample size is small, but even so: this is a surprising result.

Beyond the realm of private markets, anti-ESG sentiment in some US states has coagulated into laws designed to put a stop to it. The most recent example is in West Virginia, where state treasurer Riley Moore last week wrote to six financial institutions, including Goldman Sachs and BlackRock, to inform them that, unless they can prove they are not boycotting the fossil fuel industry, they will in effect be outlawed from doing business with the state.

Similar laws centred on fossil fuels have been enacted in Texas and Oklahoma, and 15 US states in total have said they intend to put institutions “on notice” if they boycott fossil fuels. In Idaho the equivalent rule is further reaching: a bill set to come into effect in July will ban “public entities engaged in investment activities” from considering environmental, social, or governance characteristics “in a manner that could override the prudent investor rule”.

A quote from West Virginia senator Rupie Phillips, lead sponsor of that state’s bill, sums up anti-ESG sentiment: “Senate Bill 262 is our state’s way of calling for a return to true capitalism, where investment decisions are decided by honest analyses of business decisions, while standing up to the so-called ‘woke capitalists’ who are trying to use corporate power to advance a radical social agenda.”

All this is not to paint a picture of North American private markets as an ESG-free zone. On the contrary: some of the most significant market-shaping sustainability initiatives, including various projects to standardise ESG reporting and institutionalise impact investing, have emerged from the region.

Indeed, the PineBridge survey data points to another long-running trend: US investors leading the way on DE&I – 93 percent of US managers reported having taken formal action to support the hiring of diverse talent, compared with 89 percent in Europe. It is still rare to find live, public examples of fund commitments being derailed by DE&I issues, but one emerged recently in Pennsylvania.

There may be headwinds, but ESG enthusiasts should take heart: progress is still being made.

Gina Gambetta, Dom Webb, Khalid Azizuddin and Gregg Gethard contributed to this comment.