News & Analysis

In brief: US private markets risk ‘bifurcation’ over ESG backlash

ESG ratings and demand for SFDR products were other topics discussed by a panel at Infrastructure Investor Global Summit in Berlin.

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The US’s divergent views on ESG put the private markets at risk of “bifurcation”, according to Apollo partner Vittorio Lacagnina. Speaking at the Infrastructure Investor Network Global Summit, Lacagnina said the “danger is that the industry may split between [ESG] aligned managers and non-aligned”.

ESG has become a political issue in the US. Lacagnina’s comments came on the same day the President Joe Biden used his first presidential veto to ensure investment managers are legally allowed to consider ESG matters in their investment decision-making, overturning a Trump-era law.

Earlier in the conference, panelists had played down the significance of the US ESG backlash, citing as less of a risk to sustainable investment than greenwashing.

Other notes from the stage:

  • Paul Allard, co-founder of rating agency Impak, said that industry actors were making “high level decisions” using “very low quality data” due to the limitations of ESG ratings. However, regulations are “getting there” in terms of standardising data, and the industry is “going in the right direction”.
  • There is a “strong demand for products labelled Article 8 or 9 [under SFDR]”, said Mary Nicholson, head of responsible investment at Macquarie Asset Management. Though SFDR started out as a “disclosure regime”, it has in effect become a “labelling regime”, she noted.