Much like their public counterparts, private companies can benefit greatly from sustainability programs. Private equity is well aware of the value ESG provides. However, the political situation that set back ESG for the rest of the market affected private equity as well. There is evidence that this chilling effect is thawing into 2026. New research indicates that private equity is coming back around. A new survey from Malk Partners indicates that General Partners (GPs) are reinvesting in ESG as it rebounds from the chilling effects of 2025:
“Anti‑ESG U.S. government action created a chill on ESG last year, though this effect has largely passed—apart from DEI, where firms face increased legal scrutiny. Today, most GPs are reinvesting in ESG programs; while momentum hasn’t fully returned to pre‑2025 levels, it is steadily rebuilding. That said, many companies are unable to execute on GP-driven ESG objectives, indicating that GPs’ portfolio-level direction is lacking.”
Despite interest and investment from GPs, portfolio companies are still struggling to implement sustainability initiatives effectively. The survey notes:
“Portfolio companies did not rebound in the same way as GPs over the past year; many have reduced ESG programming, which has limited their ability to capture ESG-related value. To reverse this trend, clearer and more consistent GP guidance around prioritization, implementation, and tracking is critical—especially from investment professionals involved directly in portfolio operations.”
Unsurprisingly, portfolio companies are lagging behind the expectations of LPs and GPs. Expectations and priorities often move from the top down. As GPs turn their attention back to sustainability, we can expect portfolio companies to follow.
Our members can learn more about ESG in private equity here.
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