Private markets giants have hammered home the connection between ESG and fiduciary duty in their annual sustainability reports.

Carlyle’s report is titled The EBITDA of ESG in an explicit reference to the link between ESG considerations and profitability.

“In a time of heightened scrutiny, we believe it is critical to work to build connections between the often-nebulous concept of ESG and traditional financial line items,” writes Megan Starr, the firm’s head of impact in the introduction to the report.

ESG has become a political football in the US, with certain Republicans decrying it as “woke capitalism” that places social and environmental goals ahead of investors’ need for financial returns. Republican members of the House Financial Services committee have promised to fill July with hearings on the problems with ESG in investing.

Carlyle, like other firms, makes the case for ESG considerations being integral to investment performance. “Many vital components of the ESG field are long-term, intangible, and fundamentally hard to quantify, and this philosophy [that ESG is a ‘lens’ through which to view financial risk and reward] does not discount these facts,” said Starr. “Our goal is to begin working to find those areas of direct alignment that we believe can enable us to push the field forward in a tangible way in the near term.”

Carlyle’s report goes on to describe 17 example areas in which active management of ESG considerations can be directly linked to a business’s top- and bottom-lines. For example, in terms of sales: businesses, consumers and public sector bodies are all skewing their buying habits towards suppliers with sustainability credentials. In terms of costs: labour, real estate, freight and other areas can benefit from sustainability measures.

KKR’s annual report, Creating and Protecting Value, is also upfront about how sustainability fits into fiduciary duty. “We approach sustainability through the lens of our commitment and responsibility to create and protect value on behalf of clients and shareholders,” write co-CEOs Scott Nuttall and Joseph Bae in their introductory letter.

That message is then reiterated by Ken Mehlman, global head of public affairs and co-head of the firm’s impact platform: “We are unwavering in our commitment to seek to create and protect value. We have a fiduciary duty to our clients to do so.”

Mehlman explicitly addresses issues relating to the anti-ESG movement in the US, noting that questions about the merits of ESG tend to focus on three areas: disagreement over how society should tackle the challenges we all face; what role business and finance should play in tackling these challenges; and lack of uniform definitions for terms like “ESG” or “responsible investing”.

“We welcome these questions,” writes Mehlman. “In fact, we ask ourselves these same questions. It is through dialogue and self-assessment that we can both learn from others and hold ourselves accountable.”

Mehlman positions sustainable investment as “one of many tools we have to create value” alongside things like “financial proficiency” and “operational insight”.

“Our experience has shown us that companies that focus on ESG-related risks and opportunities – where material – can create stronger, better investment outcomes,” writes Mehlman.

The word “material” appears four times in Mehlman’s letter, almost as many as “ESG” (five).

Apollo Global Management’s sustainability report leads with the connection between sustainability and financial performance. “We believe in the importance of incorporating ESG factors into our investment strategies in order to drive financial performance,” begins the introduction.

Dave Stangis, chief sustainability officer at Apollo, acknowledges the changing backdrop against which ESG is being discussed and implemented. “We are in an environment where ESG efforts are under close examination,” he writes. “The new attention is not changing the way we do business, but the conversation is helping us to be more precise in how we define what is driving the decisions we make and how we drive value for our clients.”

Earlier this year, a number of large listed firms included detailed reference to the ESG backlash in their Form 10-K regulatory annual reports.