Beyond the Noise: Why Impact Capital Still Wins
A few days ago, I was reading Global Corporate Venturing’s article “Impact funds aren’t disappearing” by Robert Lavine, and a critical point stood out: While ESG start-ups and their investors are quietly and confidently delivering impact, they could do more if they better strategically communicated this.
Yet, as we know, ESG businesses have become the target of political backlash—especially in the United States under a second Trump administration—even though impact funds are continuing to grow, diversify, and deliver value.
Populist narratives dominate the airwaves, but the story is different in boardrooms and sovereign wealth offices outside of the US: the market is rewarding reality. In fact, while four years in politics is a lifetime. In finance, it’s barely a moment.
As Global Corporate Venturing points out, impact funds are becoming essential to de-risk portfolios and build long-term value in the volatile global economy we find ourselves in.
Why? Because ESG-aligned investing is no longer a fringe movement or corporate window-dressing. It’s a calculated response to macroeconomic shifts, climate risk, technological transition, and societal expectation. In a world facing systemic shocks—from climate and biodiversity loss to geopolitical instability—impact funds are proving more resilient than carbon-heavy investments weighed down by reputational risk and stranded assets.
The Long-Term Horizon: Political Cycles vs. Financial Reality
Political leaders in Western Democracies often operate in short-term cycles: four or five years of headlines, electoral strategy, and ideological posturing. But asset managers, sovereign funds, family offices, and corporations take a far longer view—often 10, 20, or even 50 years. And the financial data is clear: ESG investing is not only here to stay but outperforming legacy models.
Despite headlines suggesting waning interest, ESG investing remains a major force—though the nature of investor engagement is evolving. According to Morningstar’s Global ESG Q4 2024 Flow Report, global sustainable funds experienced net outflows of $88 billion in 2024, reversing the modest $4.3 billion in inflows recorded in 2023. These outflows were mainly driven by Europe, which accounted for $86.5 billion in redemptions, reflecting regulatory pressures and repositioning among a handful of large managers.
However, the underlying picture is more nuanced—and telling. Passive ESG funds attracted $47.8 billion in new capital globally, while active ESG funds saw $135.9 billion in withdrawals. This shift suggests investors remain committed to sustainability but increasingly favour transparent, low-cost, index-based strategies over more opaque active approaches. In the US, ESG sentiment remains politically polarised, yet even there, sustainable strategies retain a foothold.
What this signals is not an ESG retreat but a recalibration. Investors are demanding more clarity, better performance metrics, and strategic alignment. The capital is still very much available for those able to communicate value, resilience, and measurable impact.
Strategic Moves from Global Powers
China: Outspending, Outbuilding, Outperforming
China’s green finance strategy is a masterclass in long-term positioning. By the end of 2024, green loans in China had reached ¥36.6 trillion (approx. $5.1 trillion), a 36% annual increase, now accounting for over 13% of total lending in the country.
China isn’t just decarbonising—it’s capitalising. It leads the world in solar PV, wind turbine, battery and electric vehicle manufacturing. In fact, 60% of all new renewable energy capacity between now and 2030 is expected to come from China.
This isn’t greenwashing—it’s geopolitics. While some Western governments politicise ESG, China is quietly securing its leadership in the global green industrial revolution.
The Middle East: Sovereign Funds Go Sustainable
In 2024, the Gulf Cooperation Council’s sovereign wealth funds—including Saudi Arabia’s Public Investment Fund (PIF), the UAE’s Mubadala and ADQ, Qatar Investment Authority, and Oman Investment Authority—deployed $55 billion across 126 deals in sectors including green hydrogen, renewables, smart cities and advanced manufacturing.
Equally, as a strategic example, look how the UAE has positioned itself with the new US administration through its UAE USA United programme. Here’s a post from the UAE Embassy in Washington DC that shows how economic power works.
This isn’t a reputational offset. It’s a recognition that long-term returns lie in diversified, sustainable portfolios—not fossil-fuel dependence.
Saudi Arabia’s PIF is now targeting 70% of the Kingdom’s renewable energy goals by 2030. UAE’s Masdar is investing in renewables across Africa and Asia—activity that I have personally seen.
ESG principles are increasingly embedded across these funds’ mandates—not for PR and reputation management but for Return on Investment.
ESG and Impact Investing: Financial Returns Speak Loudest
Sustainable investing is delivering.
According to Morgan Stanley, in the first half of 2024, ESG-focused equity funds outperformed traditional funds by 60 basis points, with ESG-aligned fixed-income strategies showing even greater resilience during market volatility.
Meanwhile, the International Energy Agency reported that investment in clean energy globally was expected to hit $2 trillion by the end of 2024—doubling fossil fuel investment.
Strategic Recommendations for Investors and Businesses
To realise the full potential of ESG and impact capital, decision-makers need to rethink how they position themselves and their ventures and act strategically—shaping perception, protecting reputation, and creating trusted financial narratives.
Here are some strategic recommendations:
1. Reframe ESG as Risk Management, Not Morality
Make the case for impact investing in language boardrooms and investors understand: resilience, long-term value, regulatory alignment, and reputational capital. As I wrote about before, in a Capitalist and ‘America First’ environment in which we now find ourselves in, frame ESG in terms of innovation that delivers financial returns.
Action: Equip LPs, clients and stakeholders with sector-specific data and clear performance comparisons that show how ESG-linked assets de-risk portfolios. This is all about not what you want to say and present but what you want them to understand and the necessary framing to get their support.
2. Align Capital with Policy Certainty, Not Political Noise
Ignore political noise. Track where capital is going, not where it’s being criticised. Most major economies—from the EU and China to the UAE and Singapore—are aligning with sustainable growth policies.
Action: Use policy foresight and regulatory trend analysis to identify sectors where early-stage impact investment will yield long-term first-mover advantage.
3. Prioritise Trust and Transparency in Communications
Investors want clarity. Policymakers need consistency. Stakeholders value honesty. Reputation is built on these principles—and increasingly priced into valuations, as I’ve written about before.
Action: Integrate ESG and impact narratives into annual reports, investor relations, public positioning and stakeholder communications.
4. Own the Reputation Advantage
In a world of misinformation and distrust, reputation becomes a premium. Impact capital—when properly explained and backed by data—builds authority, credibility and public trust. It is investing in stability and the future and not the past.
Action: Appoint strategic communications and reputation advisors at fund level to shape the narrative, influence stakeholders, and unlock new partnerships and markets.
The Market Will Reward Strategic Patience
The backlash against ESG may dominate short-term headlines, but the long-term financial case is unshakable.
China and the nations in the GCC are proving that with the right strategic vision, sustainable capital allocation is not only the right thing to do—it’s the most profitable.
In the battle between politics and money, trust the money. And trust those who build, communicate and protect reputations for the long haul.
