“Net Zero is dead.” “The Tories are dead.” “Democracy is dead.” Lately, everything in political life seems to be declared finished. ESG (Environmental, Social, Governance) has also been subject to this narrative. But while media headlines are loud and decisive, the reality is more nuanced.
The question shouldn’t be “is ESG dead” but whether the current framing of ESG is fit for purpose. Does today’s ESG language and architecture actually help businesses manage risk and create long-term value in an era defined by climate instability, geopolitical shocks, and social disruption? Or do we need to evolve the approach to meet the demands of the Anthropocene – a time when human activity is the dominant force shaping the Earth’s systems?
The truth is when we’re facing climate breakdown, biodiversity loss, resource stress, and rising inequality, long-term value depends on managing those risks and turning them into opportunities. That’s not ideology, it’s fiduciary duty.
Why ESG is falling out of favour
Confidence in ESG has been undermined on several fronts. What began as a strategic framework to highlight risks, drive innovation, and build resilience has, in too many cases, been reduced to compliance exercises and box-ticking. The promise of value creation has been overshadowed by bureaucracy.
A lack of consistent, reliable metrics compounds the problem. ESG ratings remain fragmented and opaque, with different providers applying divergent methodologies. Disagreement over what qualifies as “sustainable” undermines investor trust.
Framing has also been an issue. Often, ESG has been presented narrowly as a way to “de-risk” portfolios. That misses the far bigger opportunity: positioning sustainability as a driver of long-term profitability and competitive advantage. By leaning heavily on ESG as a defensive shield, its advocates have stripped it of its aspirational and transformative edge.
Global policy signals have deepened investor doubts. In the US, federal climate disclosure rules face being rolled back, with critics, many of them inside the Trump administration, branding ESG as “woke capitalism”. SEC Chair Paul Atkins has warned that because the IFRS Foundation now governs both the IASB (which sets accounting standards) and the ISSB (which sets sustainability disclosure standards), the SEC may rescind its rule permitting foreign companies to use IFRS without reconciling to U.S. GAAP, a 2007 change made on the assumption that IASB would be stable, independent and focused on financial reporting alone. This signals that the Trump administration is not just posturing, it’s moving to reshape regulatory foundations. In May, US ESG funds recorded their 10th consecutive quarter of withdrawals, $6.1 billion in just three months. Europe, traditionally the leader in sustainable finance, saw its first quarterly outflows since Morningstar began tracking in 2018.
Closer to home, the European Commission’s Omnibus I simplification package, aimed at reducing regulatory burdens, has drawn criticism for weakening key tools intended to advance the sustainability agenda. And in the UK, the government announced in July that it would not move forward with the Green Taxonomy following a long-delayed consultation.
Yet, commitments hold firm amid the noise
Despite the backlash, many have reported that the overall picture is more resilient than it appears. Globally, ESG funds are estimated to hold over $3.1 trillion. A 2025 BNP Paribas survey of more than 400 investors found nearly nine in ten are not scaling back on sustainable investment goals with consumer demand still high The same survey found that 85% now integrate sustainability directly into investment decisions, moving away from generic screening, and over 80% expect the pace of ESG progress to remain steady or accelerate through 2030.
In April, Morgan Stanley found that nearly 90% of investors globally say they are interested in investing in companies or funds that aim to achieve market-rate financial returns while also considering positive social and/or environmental outcomes. What has changed is not the direction of travel but the tone: investors may talk about it less, but the commitments remain – a trend increasingly described as ‘greenhushing’.
At the same time, political landscapes are uneven. As Mark Lumsdon-Taylor and Chris Blundell from MHA highlight, federal support for ESG may be weakening in the US, yet Democratic-led states are doubling down. California, for example, continues to pursue ambitious emissions reductions while positioning itself to capture the economic gains of the green transition. This kind of state-level leadership shows that ESG remains a market-shaping force, even where national politics resists. This week, the Net Zero Tracker initiative released new analysis on climate target-setting, highlighting sustained momentum. The report shows that subnational actors and companies continue to push forward, with the number of large publicly listed US companies setting net zero emissions targets rising by 9% year over year, exemplifying divergence between the private sector and federal government.
The execution gap
The deeper problem is not intent but execution. As the Cambridge Institute for Sustainability Leadership (CISL) has argued, we do not have time to completely rebuild institutions before ecosystems reach critical tipping points. Instead, markets must be leveraged to deliver change quickly and at scale. That requires redesigning incentives, so sustainability is seen as competitiveness, not responsibility.
The decision to cancel the green taxonomy had felt like a foregone conclusion well before the UK government’s announcement. By contrast, the move to require corporate transition plans, one of the few direct pledges in Labour’s manifesto, is far closer to the direction set out by CISL. Transition plans oblige companies to compete, at least in part, on the credibility of their decarbonisation strategies, offering a more robust platform for economic transformation. The World Economic Forum estimates that climate change could generate $10.1 trillion in annual business opportunities by 2030, a reminder that reforming markets is not only about risk management, but about capturing the scale of value that comes with credible transition.
Transition plans carry built-in integrity because business leader know that climate change and biodiversity loss are not abstract threats, they are measurable risks that undermine business as usual, particularly those sectors contingent on nature and the environment. Companies should no longer ask “how much sustainability can we afford?” but rather “how do we accelerate and benefit from the transition?” The Swedish steel, mining and utility firms behind the HYBRIT initiative illustrate this mindset, developing fossil-free steel to reinvent their industry and position themselves for leadership. By contrast, sectors clinging to narrow compliance, such as plastics firms defending weak recycling claims, risk being left behind.
The policy lesson is clear, regulation sets the floor, not the ceiling. It ensures minimum standards but cannot mandate imagination or innovation. Forward-thinking businesses and investors are reframing ESG not as a cost centre but as a source of resilience and competitive advantage.
Crossbench peer Lord Freyberg has underlined that companies with ambitious ESG strategies are already accessing exclusive financial opportunities. Speaking in Parliament, he referenced analysis from LSE showing that reaching Net Zero may initially require investment equivalent to 1–2% of GDP annually, but that these flows are expected to generate net savings by around 2040. Crucially, these are redirected capital flows, not entirely new costs, reinforcing the point that the transition is not just feasible but strategically beneficial.
Policymakers must clarify, not confuse
ESG needs to evolve, but we should resist the temptation to announce its demise or, in Richard Tice’s less-than-helpful words, “Net Stupid Zero.” Such rhetoric risks undermining not only the move to towards sustainable business, but also growth.
The hype of 2020-21 has cooled, the backlash now dominates the rhetoric around ESG, but behind the noise, investors continue to integrate sustainability, companies continue to align strategies, and consumer demand remains high. ESG as a term may change, but the idea that long-term business success depends on environmental and social stability and strong governance is clear.
For ESG to deliver on its promise, governments must play a central role. The government’s consultations this summer on sustainability reporting standards, transition planning, and assurance integrity are a useful start, but awareness of ESG’s fundamental role remains limited in policymaking. Outside a handful of references, such as Aldershot MP’s Alex Baker MP’s call for defence to not be penalised, ESG rarely features in parliamentary debate, despite being embedded across corporate and financial decision-making. Policymakers should reaffirm the UK’s commitment to corporate responsibility and sustainable investment, provide clarity on regulatory expectations, and ensure sustainability is recognised not as a siloed add-on but as a core component of a resilient, competitive economy, and of accountability to people and the planet.
