(Bloomberg) -- Apollo Global Management Inc. is pledging not to invest in fossil fuels in its next buyout fund, distancing itself from a sector that has led to losses and controversy for private equity firms. 

The company has communicated the plan while seeking to raise $25 billion for its latest flagship offering, according to people familiar with the matter.

The decision is yet another step by Apollo to steer away from the sector as asset managers face intense pressure to invest in companies with positive environmental practices. It also comes as the financial industry grapples with navigating the politics of environmental, social and governance investing.

A spokeswoman for New York-based Apollo declined to comment. 

While Democratic-led states have praised firms for shunning fossil fuels, such stances have triggered a backlash in Republican-dominant states. Last year, Texas Governor Greg Abbott signed a bill banning state investments in businesses that cut ties to oil and gas industries.

Apollo’s most recent fund, dated 2017, has backed just two companies that provide services to the oil and gas sector. The firm had marketed the space as a core focus when seeking money from investors.

By contrast, natural resources investments accounted for 18% of Apollo’s 2013 fund, making it the second-largest sector in the vehicle, according to an internal document seen by Bloomberg.

While Apollo’s latest decision may appear woke, it also reflects a stark reality: The shale boom and bust and the early parts of the Covid-19 pandemic created losses for the private equity industry. Five of the nine natural resources investments Apollo made in its 2013 fund were losing money as of the end of the third quarter, the document shows. 

The move to avoid natural resources is in part reflected in the performance of Apollo’s 2013 and 2017 funds, which have performed in the bottom half and top half of peers, respectively, as of Sept. 30, according to data compiled by Bloomberg.

The firm, which also oversees natural resources funds, managed $5 billion in that strategy as of Sept. 30. That accounted for 6% of Apollo’s $86 billion private equity portfolio.

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