The President Donald Trump administration has introduced plenty of uncertainty into the markets, but one thing that seems beyond doubt is that regulatory protections are diminishing. This is just one of a number of themes that sustainably minded private-markets investors are tracking as Earth Day approaches. We outline this and numerous other relevant themes—including profitability challenges in energy transition investing and a decline in climate fundraising—in our April 2025 paper, The State of Sustainable Investing in the Private Markets. Here are a few highlights.

Regulatory Protections Are Falling

The new US administration signifies a shift toward less stringent regulation, as evidenced by many of the actions President Trump has taken during the first few months of his term. Two important actions with relevance to environmental, social, and governance considerations were the appointment of Lee Zeldin as the administrator of the Environmental Protection Agency, who announced 31 deregulatory actions that the agency will undertake within two months of his confirmation, and a slew of budget and staffing cuts across numerous government agencies. While US-based companies were once impelled to produce robust programs focused on preventing and remediating environmental harm in part because of the watchful eyes of the EPA, the agency will have a weakened capacity to track and penalize companies compared with what it once had.

This does not mean that ESG risks are now immaterial for businesses operating in the US. If the EPA does not catch an environmental contamination incident, nearby residents or local community organizations may do so instead, leading to protests and publicity that impede operations, harm a company’s reputation, and erode customer goodwill. Now that many US government agencies have less budget, bandwidth, power, and intent to regulate as they once did, fund managers who fail to address the gap between what portfolio companies can get away with in the near term and the practices that will prevent them from experiencing reputational damages and operational shutdowns later may pay the price down the line.

Profitability Is Shifting in Energy Transition Investing

Governments worldwide have put resources toward addressing the problem of meeting expanding energy needs while not increasing the conventional fossil fuel-based energy usage, which is one of the foremost contributors to climate change. Investment opportunities have arisen from these and other sources, and infrastructure fund managers have taken note, with over $100 billion raised over the past three years by specialist funds investing exclusively in energy transition infrastructure. When including generalist funds that only invest partially in the space, that figure jumps to $313.3 billion. [For more on energy transition infrastructure fundraising and performance trends, download PitchBook’s Infrastructure Funds Fuel the Energy Transition report.]

Allocators have increasingly sought exposure to energy transition infrastructure, not only because they believe it is poised to perform well but also because of stakeholder pressure to decarbonize portfolios and incorporate ESG analysis in the investment process. Private equity firms have also found opportunities across a variety of climate-related market segments such as carbon capture and storage, green chemicals, low-carbon manufacturing, sustainable consumer goods, low-carbon mobility, and clean energy and fuels.

We know of at least 166 private equity funds that invest to some degree in climate-related opportunities and have successfully closed since the beginning of 2022, receiving $107.2 billion in commitments. Over half of the funds are specialist funds, which raised $43.6 billion of the total.

Although energy transition infrastructure and private equity climate funds have been experiencing considerable fundraising tailwinds, neither fund type has been immune to the slowdown that hit the broader private markets beginning in 2022. In the US, we may see this decline extend as pro-climate policies are reversed, changing the economics of projects that at least partially rely on subsidies or grants. Furthermore, the Trump administration has indicated a preference for fossil fuels and discussed plans to levy tariffs that will negatively affect certain countries’ renewables manufacturers and producers. While segments of clean and low-carbon energy are thought to be cost-competitive even without subsidies, tariffs and permitting issues owing to a less-than-friendly attitude toward these energy sources may further eat into returns.

Climate’s Share of Impact Fundraising Falls

Climate fundraising fell way back as a percent of impact fundraising this year, but so much was raised in 2023 that the decline could simply indicate that the established players are all investing out of their 2023 funds and will be back for more capital in a year or two. Our 2024 Sustainable Investment Survey asked impact investors what IRIS+ categories were a focus for investors, and the numbers aligned fairly well with where we saw 2024 capital flowing.

The survey respondents chose the categories in this order of frequency: energy, climate, health, and water. The focus on water among our survey respondents did not come through as strongly in the fundraising data, where it was only eighth, though we are hearing water as a topic of conversation more often these days, related particularly to improving usage efficiencies connected to agriculture, data centers, and semiconductors.

As of March 2025, we had identified 27 private-market impact funds that had successfully closed in the year to date. These funds are based in 14 different countries and represent $9.4 billion in capital. Three have biodiversity and ecosystems as an aim, an impact area that has typically been a fairly small percentage of the impact fund universe, though it has been increasing in recent years. Thirteen other 2025 funds have climate as an impact objective. In a world where government resources may be pulled from the global monitoring of weather and other environmental characteristics, opportunities in these areas that fill any new data voids may be fruitful as insurance companies, farmers, air traffic controllers, and many more rely on current measurements to make informed business decisions.

While Q1 2025 fundraising data would not have reflected investor sentiment under the new US administration, as the funds would have been seeking capital commitments long before the targets of funding cuts were announced, impact investors are actively assessing the current environment for new profitable opportunities.

The nine funds targeting impact energy thus far in 2025 may be in a good position to provide additional energy at a profit, though, as mentioned above, permitting issues and a departure from 2022 Inflation Reduction Act subsidies and tax credits will change the profitability math for certain projects.