Introduction
Environmental justice (EJ) is a defining factor in how companies secure their license to operate, grow, and deliver returns. For asset managers, EJ considerations now cut across the entire investment lifecycle, influencing mergers and acquisitions, capital project approvals, permitting, community relations, and even day-to-day manufacturing decisions. These are no longer a niche policy concern but are in fact a key factor in whether companies are positioned for sustainable, long-term success.
At its core, EJ is about who benefits from economic development and who bears the costs. EJ promotes justice and accountability in environmental matters, focusing on the respect, protection and fulfilment of environmental rights, and the promotion of the environmental rule of law (United Nations Development Programme). For companies, this means that siting facilities near vulnerable communities, relying on hazardous chemicals, or neglecting stakeholder engagement can trigger litigation, reputational damage, and stranded assets. For investors, it translates into heightened operational risk, disrupted cash flows, and declining valuations. Adherence to EJ principles positions companies to avoid these risks.
As regulatory protections shift and community advocacy strengthens, EJ is a material driver of both downside risk and long-term value creation. The 2026 investment landscape demands a more rigorous, proactive integration of EJ into portfolio strategies as a core component of fiduciary duty.
State of Play
The regulatory and policy terrain for EJ has entered a period of heightened volatility predominantly in the U.S. Under the Biden administration, federal tools such as EJScreen and the Climate and Economic Justice Screening Tool expanded transparency and established a baseline for integrating equity into environmental decision-making. These frameworks have now been dismantled under the Trump administration, creating an uneven national landscape.
The Trump administration has reduced federal environmental obligations across climate, pollution, and EJ, lowering near-term compliance costs but introducing significantly greater regulatory volatility, state–federal divergence, and legal risk.
Without robust federal oversight and leadership, EJ risks have multiplied. Companies now face a patchwork of state-level mandates, local permitting requirements, and intensifying community activism. This fragmentation increases market risk and regulatory uncertainty, exposing businesses to inconsistent standards, delays, and mounting threats of litigation.
For companies, the absence of federal guardrails means that the burden has shifted to corporate boards and management to define responsible practices. Strategic planning that accounts for this volatility through proactive adherence to EJ standards has become the most effective defense against looming reputational harm and costly disputes.
For asset managers, the state of play is clear: EJ is now a frontline portfolio risk shaped by three forces—regulatory retreat at the federal level, rising state and community pressure, and growing investor demand for accountability. Companies that anticipate and integrate EJ concerns will avoid likely legal and financial shocks and be positioned as leaders in a market increasingly defined by transparency, equity, and trust. Investors should track pending court challenges, state policies, and company strategies to manage policy whiplash and where appropriate consider weighing in on policies with position papers.
Why Environmental Justice Matters for Asset Managers
For investors, EJ is now a material driver of both risk and opportunity. Companies that fail to adequately account for EJ concerns increasingly face exposure to regulatory delays, litigation, and reputational harm. Asset valuations can erode quickly when projects encounter local opposition or when hazardous emissions disproportionately impact vulnerable communities. In addition, the rollback of federal protections in the U.S. has not reduced the salience of EJ risks but has instead created a volatile patchwork of state-level mandates and intensified community advocacy. This regulatory fragmentation increases uncertainty and raises the probability of costly disruptions, stranded assets, and brand damage.
At the same time, integrating EJ considerations into core business strategy offers measurable long-term value. Companies that engage communities proactively, disclose facility impacts transparently, and prioritize safer materials enjoy smoother permitting processes, faster project approvals, and stronger brand trust. Research shows that businesses aligning with principles of sustainability and environmental stewardship are more resilient in the face of market shifts and regulatory changes, and are more likely to attract sustainable investment flows[1]. For asset managers, this means that EJ is not just a risk mitigation strategy but a pathway to portfolio resilience, as firms that anticipate and address these issues are better positioned to compete in markets increasingly defined by transparency and accountability.
From a fiduciary perspective, ignoring EJ considerations can amount to overlooking material risks that affect long-term performance. Asset managers are well-positioned to incorporate EJ into due diligence, proxy voting, and corporate engagement strategies. Doing so strengthens the ability to identify leaders versus laggards, and to channel capital toward business models aligned with equity and sustainability. In practice, EJ integration reinforces fiduciary duty by ensuring that portfolios are not exposed to avoidable social, legal, and operational risks, while simultaneously capturing opportunities linked to safer chemistry, community trust, and sustainable innovation.
For asset managers, EJ can materially affect a company’s operational performance, litigation exposure, and license to operate while mitigating portfolio risk. In the 2025 landscape, where federal protections are receding, the onus is increasingly on capital providers to integrate EJ into their investment strategies.
For asset managers, EJ is most material in sectors with:
- Facility siting near vulnerable communities
- Hazardous emissions or chemical use
- High exposure to permitting and regulatory oversight
- Public-facing brands vulnerable to reputational risk
Why Environmental Justice Matters for Companies
For companies, EJ is a critical determinant of operational continuity and long-term competitiveness. Failure to account for EJ concerns can result in litigation, regulatory delays, community protests, and negative media coverage — all of which directly undermine productivity and profitability. Companies with facilities near vulnerable populations are particularly exposed, as permitting challenges, lawsuits, or shutdowns can translate into stranded assets and higher costs of capital. In addition, global consumers and supply chain partners increasingly expect companies to demonstrate alignment with equity, sustainability, and safety standards. Reputational damage from poor EJ performance can therefore ripple outward, eroding brand trust and market share[2].
On the other hand, companies that proactively integrate EJ considerations into governance and operations can capture clear strategic benefits. Early engagement with local stakeholders reduces the likelihood of costly project delays and builds community goodwill, a critical factor in securing and maintaining a company’s “social license to operate”. Research shows that firms prioritizing equity and environmental risk reduction are more likely to achieve smoother permitting processes, enjoy favorable regulatory treatment, and secure stronger relationships with investors and customers. Companies also benefit from adopting safer materials and cleaner production processes, which reduce long-term liability risks, enhance workforce health and productivity, and create differentiation in competitive markets increasingly shaped by sustainability[3].
Moreover, aligning with EJ principles positions companies to anticipate and adapt to emerging policy landscapes. Even as U.S. federal oversight has weakened, state-level regulations and global frameworks such as the European Union’s Corporate Sustainability Reporting Directive (CSRD)[4] and Green Deal are setting higher standards for hazard disclosure, community engagement, and equitable practices. Companies that lead on EJ will be better prepared to comply with evolving mandates, while laggards risk regulatory penalties, market exclusion, and declining investor confidence. In this way, EJ is not simply a compliance issue but a forward-looking strategy for resilience, growth, and long-term value creation.
Call to Action: Fiduciary Tools and Strategies
Asset managers can use their influence and analytical capabilities to mitigate EJ risk across portfolios:
- Embed EJ in Due Diligence and ESG Analysis
- Integrate environmental justice into risk models, especially for infrastructure, manufacturing, and extractive industries
- Use state-based community-level screening data in evaluating new investments
- Ask Targeted Questions in Engagement
- Does the company disclose facility locations and community impact assessments?
- Has it assessed EJ risk under NEPA, TSCA, or RCRA obligations?
- What metrics does it use to track chemical hazard reduction or facility emissions?
- Is there a plan to transition to safer alternatives?
- How does the company engage communities to ensure concerns and needs are met?
- Vote Proxies and Resolutions with EJ in Mind
- Support shareholder proposals seeking chemical hazard disclosure or community impact reporting
- Oppose management where poor EJ governance threatens brand and operational stability
- Support Collective Initiatives
- Join the Investor Working Group on Environmental Justice (IWGEJ) — an ICCR working group co-supported by the Investor Environmental Health Network (IEHN), a program of Clean Production Action
Looking Forward: Aligning Risk Management with Equity
EJ is now a proxy for how well a company manages operational risk, regulatory foresight, and stakeholder trust. In the absence of federal enforcement, investors must lead in advancing inherently safer, community-aligned production systems. This includes moving capital away from polluting practices and toward companies that prioritize equity, transparency, and long-term resilience.
Asset managers have both the tools and fiduciary responsibility to act. Integrating EJ considerations is now central to protecting asset value and advancing more equitable investment outcomes.
[1] McKinsely Quarterly: Five ways that ESG creates value: Getting your environmental, social, and governance (ESG) proposition right links to higher value creation.
[2] Journal of International Financial Markets, Institutions & Money: Corporate social irresponsibility and portfolio performance: A cross-national study
[3] Harvard Business Review. “The Comprehensive Business Case for Sustainability.” 2016
[4] European Commission. Corporate Sustainability Reporting Directive (CSRD).