General partners ( GPs ) across Asia continue to embed environmental, social and governance ( ESG ) considerations into their investment processes, but with a marked shift in tone.

While governance structures are strengthening, policy enthusiasm is waning, especially amid shifting sentiment in global markets like the United States, according to law firm Morrison Foerster’s ESG + Sustainability Investing in Asia Survey 2025, conducted in partnership with AVCJ.

The survey captures the perspectives of 100 Asia-Pacific-based GPs, each managing more than US$1 billion in assets. Participants span private equity, credit, special situations, sovereign wealth funds, insurance asset managers, and pension funds, with the largest group headquartered in mainland China and Hong Kong ( 35% ), followed by Japan ( 25% ) and Southeast Asia ( 15% ).

In terms of governance, the survey finds that ESG oversight has become more institutionalized. Sixty percent of respondents now have a dedicated ESG or sustainability committee, a notable increase from 43% in 2023. Over half of these committees are now singularly focused on ESG issues, reflecting a maturation of internal frameworks.

However, momentum appears to be slowing when it comes to policy evolution. Nearly four in five GPs ( 79% ) reported no recent changes to ESG-related policies or how they are applied.

Of those that did make adjustments, most were driven by compliance rather than conviction, the survey finds, with only 11% introducing new policies and 10% scaling back or halting implementation altogether.

Limited partners ( LPs ) also seem to be applying less pressure. Just 18% of GPs said LPs had raised concerns about ESG policy or implementation, down sharply from 33% in the previous year. A third also noted fewer LP requests for ESG-aligned investment restrictions.

A key shift is the influence of geopolitical developments. One-quarter of respondents acknowledged that recent pushback against ESG in the US had led them to slow or revise their sustainability activities. This echoes a broader recalibration taking place globally, as political divides and accusations of "greenwashing" disrupt the ESG narrative.

More pragmatic

Despite this cooling of policy momentum, ESG integration into investment decision-making remains significant. Eighty-seven percent of GPs conduct ESG due diligence on most or all of their deals.

Nearly half ( 49% ) have rejected a deal over ESG concerns, double the rate from just two years ago. However, the number of firms actively investing to improve the ESG credentials of portfolio companies has dropped from 91% in 2023 to 49% this year.

GPs appear to be increasingly discreet about green strategies. While 91% claim to have green investment practices, 62% say they pursue these quietly, wary of public scrutiny. As a result, communications governance is tightening: 72% now have policies controlling ESG claims made by portfolio companies, up from 54% in 2022.

Crucially, however, ESG is still seen as a value driver. Ninety-two percent of GPs believe strong ESG performance can enhance valuations, while 93% see it smoothing the exit process.

Yet they are also clear-eyed about the challenges. Regulatory volatility, compliance burdens, and technology risk, particularly regarding artificial intelligence, are emerging as new frontiers in ESG oversight.

The survey findings suggest that Asia’s GPs are not abandoning ESG, but are adjusting their strategies. Formal structures are being fortified, while public narratives and policy expansions are being approached with caution. According to Morrison Foerster, it’s ESG 2.0: quieter, more pragmatic, and increasingly shaped by global crosswinds.