The 2025 Responsible Investment Forum: Europe highlighted a market recalibrating – less focused on public ESG declarations and more on disciplined, commercially grounded execution. Conversations across LPs, GPs, and operating partners reinforced that responsible investment is evolving from a reporting exercise into a driver of real value creation, risk mitigation, and strategic advantage. Below are Malk’s top takeaways from this year’s discussions.
1. Market Sentiment: Less Noise, More Action
Despite shifting geopolitical pressures and diverging national priorities, net-zero sentiment among major institutional investors remains largely unchanged. Public disclosure of climate commitments is softening, but the underlying work to decarbonize portfolios and improve ESG performance continues. Investors are moving away from high-visibility pledges toward quieter, execution-oriented programs.
This is coupled with the EU regulation rollback. For example, the CSRD Omnibus is expected to:
- Free up internal resources for higher-value strategic work.
- Shift ESG back toward value creation rather than pure compliance.
- Maintain enough regulatory pressure to keep C-suite attention.
At time of the conference, SFDR 2.0 was not released, resulting in significant speculation on the leaked draft implications. More to follow on SFDR 2.0.
2. Value Creation: ESG Wins When It Solves Business Problems
A clear message: ESG initiatives gain traction when framed as solutions to business problems – not as standalone sustainability goals.
- C-suite engagement is essential. Value creation happens when ESG sits within broader commercial conversations, not siloed within sustainability teams.
- Revenue and margin impact matter. The most effective approaches layer ESG into core operational and financial priorities.
- Organizational models vary, but a common trend is integrating sustainability expertise alongside operational specialists, commercial strategists, and technical functions.
The winners are those who embed ESG into the levers executives already care about: efficiency, resilience, cost, and growth.
3. Engaging Deal Teams: Storytelling + Data = Traction
Across the ecosystem, the biggest barrier to influencing deal teams is the perception that ESG is “compliance, not value creation.” Other challenges include measuring ROI on sustainability initiatives, competing priorities, and limited bandwidth.
Practical recommendations emerged:
- Start early. Conduct alignment sessions pre-close and again before the first management meeting to set expectations and strategy.
- Stay disciplined. Maintain momentum after diligence – this is when deal teams are most open to influence.
- Be material. Avoid presenting long lists of nice-to-have ESG actions; focus on what truly moves the needle.
- Use stories backed by data. Narrative creates relevance; data builds conviction.
Ultimately, integration depends less on templates and more on building credibility with deal teams.
4. Defence Investing: A Rapidly Evolving Landscape
Shifting geopolitical realities – particularly the ongoing conflict in Ukraine – are reshaping investor attitudes toward defence.
Key themes:
- European investors are moving first, particularly in northern Europe, while banks and family offices are adjusting lending and allocation frameworks.
- Effective diligence begins with fundamentals: What is the product? Who is the customer? Where are your red lines?
- Dual-use technologies carry additional complexity, and some markets require civilian applications to be viable.
- Regulation remains navigable, with focus on export controls and dual use. SFDR (v1.0) challenges arise primarily around controversial weapons screening and demonstrating “do no significant harm.”
The market is recalibrating risk appetites, underwriting processes, and LP expectations across this sector.
5. AI in Private Markets: Strong Appetite, Uneven Readiness
Firms are experimenting widely with AI, but maturity levels vary significantly.
- Core risks include: ethics, privacy, model bias, and misinterpreting or over-trusting outputs.
- Mitigating factors: strong data governance, training, and ensuring models are built on the right document types and languages.
Emerging best practices:
- Define the infrastructure first – AI should accelerate processes, not replace judgement.
- Layer internal risk frameworks on top of AI outputs to guide escalation and decision-making.
- Improve energy efficiency by optimizing prompts and workflows.
- Use cases are diversifying, including emissions analysis, site safety monitoring, language interpretation, and automated GP/LP reporting extraction.
The consensus: build intentionally, optimize continuously, and keep humans firmly in the loop.
Final Thoughts
The 2025 Responsible Investment Forum made one theme clear: responsible investment is entering a phase defined by integration, pragmatism, and commercial relevance. Public narratives may be cooling, but private-market activity is becoming more sophisticated, data-driven, and strategically embedded.
For private equity firms navigating this landscape, the opportunity is to shift ESG from an obligation to an advantage – aligning sustainability with value creation, operational resilience, and long-term performance.
If you’d like help interpreting these themes or apply them to your ESG program or fund strategy, Malk’s team is here to support.