bfinance: Heightened geopolitical concerns, nuanced ESG reassessment
In March 2025, bfinance invited institutional investors to participate in a snap poll conducted in the wake of mounting economic and geopolitical turbulence.
Recent months have seen significant disruption to global markets amid sharply escalating rhetoric and policy shifts from major economies. In the US, the return of President Trump to the political fore has brought a renewed focus on tariffs and protectionist measures—alongside a marked pivot away from sustainability and DEI (diversity, equity and inclusion) initiatives.
Against this backdrop, 168 investors across 34 countries contributed their insights to this snap poll. The results reveal a nuanced but clear picture: perceptions of geopolitical risk are rising sharply, risk appetite remains largely unchanged, and attitudes towards ESG are diverging both regionally and by investor type.
Geopolitical risk: rising concern, steady appetite
A substantial 82% of respondents reported that geopolitical risks to their portfolios had increased since mid-January. This figure was consistent across regions, with only small pockets expressing dissent:
- Europe: 85% reported increased risk; just 4% stated a decrease.
- Americas: 80% said increased; 6% claimed decreased.
- Rest of World: 80% believed it had increased; no respondents reported a decrease.
Investor commentary suggests that recent policy volatility—particularly in the United States—has triggered a notable recalibration of geopolitical risk. Investors pointed to an increasingly unpredictable political environment, trade tensions, and shifts in global alliances as key contributors.
'US politics have become highly unpredictable, with social and economic consequences both domestically and internationally,' one investor observed. Another remarked: 'Trump has upended the forward view of the world order. Political certainties are now uncertain, and that has a knock-on effect on economies.'
And yet, despite this overwhelming sense of unease, the majority of investors appear to be holding steady. Three quarters of respondents stated that their risk appetite remained unchanged, with only a small proportion reporting any increase or decrease.
The perception of increased geopolitical risk was consistently high across all investor types, with no particular group diverging significantly from the global average. Defined benefit pension schemes, insurers, endowments, family offices and sovereign wealth funds alike reported rising concern—emphasising that this is not a regional or structural anomaly but a broad institutional consensus
ESG investing: reassessment, not retreat
When asked how attractive ESG investing has become since mid-January, 46% of investors claimed that nothing had changed. That said, nearly a quarter (24%) stated that ESG had become less attractive, while just 9% said it had become more appealing.
The commentary suggests this is not a wholesale rejection of ESG but rather a re-evaluation of how ESG strategies are applied in practice—especially in light of political developments in the US, where support for DEI and sustainability frameworks has become more contentious.
Around half of all investors indicated they are actively re-evaluating their investment assumptions relating to ESG, impact, sustainable or climate-oriented investing. One investor noted: 'Chaotic and unpredictable leadership undermines certainty for businesses, and ESG focus has clearly taken a negative pivot.'
Another added: 'Too much uncertainty on investment to have a view. On ESG, the lack of evidence of gains, allied to the promotion of defence and oil/gas stocks, makes ESG less attractive—unless defence is now ESG, as you need security to allow improvements to E, S and G.'
Investor type matters: varied ESG sentiment
While the majority of investors are not abandoning ESG principles, there are meaningful differences by investor type:
- DB pension funds showed the most engagement, with 45% of them stating ESG was 'unchanged', 24% saying it was 'less attractive', and just 5% calling it 'more attractive'.
- Insurers followed a similar pattern, with 57% claiming that their ESG approach remained 'unchanged', 18% citing it as 'less attractive', and 7% viewing it as 'more attractive'.
- Other Institutional Investors were more polarised: 36% 'unchanged', 25% 'less attractive', and a notably higher 17% 'more attractive'.
- Endowments and Foundations, typically values-driven, leaned toward ESG consistency, with 44% reporting no change, 33% saying less attractive, and 6% more attractive.
- Family Offices and Wealth Managers showed lower levels of change.
These patterns suggest that mission-linked investors—such as endowments—are somewhat more resilient in their ESG commitment, while pension schemes and insurers, often under more direct regulatory or performance scrutiny, are more likely to be reconsidering their positions.
Regional divergence: Europe vs Americas
Perhaps the clearest division in ESG attitudes emerged at the regional level. In Europe, a majority of respondents stated that the attractiveness of ESG investing remained unchanged, with a modest minority indicating that it had become 'more attractive'. However, many respondents in the Americas reported a decline in ESG appeal, with a smaller proportion seeing no change—and very few expressing increased interest.
This divide reflects not just market sentiment but also political context. European investors operate in a landscape where ESG and sustainability remain deeply embedded in policy frameworks and regulatory expectations. In the US, however, the conversation has shifted: executive orders targeting DEI, criticism of ESG with some labelling it as 'woke investing' and legal challenges to ESG mandates have created a more fragmented and politicised environment.
These pressures are being felt directly by investors. Several US respondents noted they are reducing exposure to companies that have rolled back DEI commitments or are reassessing ESG ratings methodologies.
Looking ahead: scrutiny and selectivity
The picture that emerges from this snap poll is not one of dramatic swings, but rather subtle and widespread reassessment:
- Investors are navigating increased geopolitical risks with a steady hand, maintaining their strategic positions even amid intensifying global uncertainty.
- On ESG, few are stepping away, but many are scrutinising their frameworks more closely than before—particularly in regions where political rhetoric has introduced fresh complexity.
As one respondent summarised: 'We are not reducing ESG; we are revisiting the assumptions that underpin it.'
The findings underscore a period of strategic recalibration among institutional investors. While geopolitical risks and policy shifts, particularly in the US, have prompted a reassessment of certain investment strategies, the core commitment to long-term objectives remains intact. European investors, in particular, continue to uphold ESG principles, whereas their US counterparts navigate a more complex and evolving policy landscape.
