Is ESG Dead?

Environmental, Social, and Governance (ESG) criteria have become critical for investors and corporate leaders. Companies are now evaluated on sustainability, social responsibility, and governance, particularly in supply chain pre-qualification. However, recent political and market shifts, especially under the Trump administration, have raised concerns about ESG’s durability. This article explores these changes and their implications for the future of ESG.

The Rise of ESG

ESG investing gained momentum in the early 2000s as awareness of climate change and social justice grew. Investors wanted financial returns while ensuring their investments positively impacted society and the environment. As ESG awareness increased, institutional investors adopted these standards, believing responsible practices led to long-term financial gains.

By the end of the decade, ESG had entered the mainstream. Funds promoting ESG principles attracted significant investments, and companies committed to transparency. Initiatives like the United Nations Principles for Responsible Investment (UNPRI) provided frameworks for aligning corporate practices with ESG goals, offering measurable criteria for sustainability and governance.

The Trump Administration’s Impact on ESG

The return of the Trump administration in 2025 could signal a shift in U.S. sustainability initiatives. Many policies directly challenge ESG principles. Key actions include:

1. Deregulation and ESG Challenges

The Trump administration is expected to roll back environmental regulations. For ESG advocates, this raises concerns about corporate practices moving away from sustainability norms.

2. Withdrawal from the Paris Agreement

Within hours of his second inauguration, President Trump announced the U.S. withdrawal from the Paris Climate Accord. This move weakens global climate change efforts and sets a precedent for corporate responsibility in environmental sustainability.

3. Promoting Coal and Fossil Fuels

The administration’s support for coal and fossil fuels conflicts with the global shift toward renewable energy. Many believe this will encourage businesses to deprioritize ESG concerns.

4. Critique of ESG Investing

The Trump administration has criticized ESG investing, arguing it hampers economic growth. High-profile officials claim ESG initiatives are politically driven, increasing skepticism among conservative investors.

These actions create uncertainty for ESG, forcing companies to navigate a business environment that appears opposed to progressive governance and sustainability standards.

Recent Developments in ESG

The Biden administration prioritized climate change, social equity, and corporate accountability. However, challenges from Trump’s first term still impact ESG discussions.

1. Backlash Against ESG

A growing backlash against ESG investing has emerged, particularly among Republican lawmakers. Some states introduced legislation restricting pension funds from considering ESG factors, citing concerns about fiduciary responsibility.

2. Market Volatility and ESG Performance

Market fluctuations raise questions about ESG investment performance. Critics argue ESG funds may underperform in certain sectors, prompting some investors to reconsider their commitment to ESG criteria.

3. Greenwashing Concerns

The rise of ESG has led to concerns about greenwashing — where companies highlight minor environmental initiatives while ignoring harmful practices. This weakens ESG credibility and raises doubts about corporate commitment to sustainability.

Despite this backlash, many investors continue advocating for ESG, seeing it as a way to manage risks related to climate change, social unrest, and governance failures.

Looking Ahead: Is ESG Dead?

The question of whether ESG is “dead” may be too extreme. While it faces challenges, it is essential to recognize that the fundamentals driving the ESG movement are still relevant:

1. Investor Demand for ESG

Surveys show that younger investors favor sustainable and ethical investing. This demand pressures companies to maintain ESG commitments.

2. Global Initiatives and Frameworks

International bodies like the United Nations and the European Union are reinforcing ESG reporting standards. These frameworks encourage businesses to adopt stronger sustainability and governance practices.

3. Corporate Accountability and Stakeholder Capitalism

Stakeholder capitalism emphasizes corporate responsibility beyond profits. Companies recognize that sustainable practices enhance brand loyalty, employee retention, and competitiveness.

4. Technological Advancements in ESG Tracking

New technologies like AI and big data improve ESG metric tracking and reporting. Companies use these tools to measure sustainability progress and rebuild trust in ESG claims.

5. Climate Risks as Financial Risks

The World Economic Forum’s Global Risks Report highlights climate change as a major business risk. As companies and investors acknowledge these threats, ESG analysis remains crucial in financial and corporate strategies.

Conclusion

Despite political backlash, market skepticism, and greenwashing risks, ESG is far from dead. ESG principles address pressing social and environmental challenges that continue growing in urgency.

Trump’s influence has created turbulence for ESG advocates, but the broader trend toward sustainable investing reflects deeper societal changes. The rise of stakeholder capitalism and investor demand for corporate accountability suggest ESG is evolving rather than disappearing.

As businesses and investors navigate this shifting landscape, the call for ESG transparency and responsibility remains strong. Whether through regulatory changes or evolving market dynamics, ESG principles will shape the future of investing.

Ultimately, corporate leaders and investors must decide whether ESG is about compliance or creating a sustainable, profitable future. While ESG faces scrutiny, its continued relevance suggests it will adapt to meet societal needs while driving long-term value.

About the Author

James A. Junkin, MS, CSP, MSP, SMS, ASP, CSHO is the chief executive officer of Mariner-Gulf Consulting & Services, LLC and the chair of the Veriforce Strategic Advisory Board and the past chair of Professional Safety journal’s editorial review board. James is a member of the Advisory Board for the National Association of Safety Professionals (NASP). He is Columbia Southern University’s 2022 Safety Professional of the Year (Runner Up), a 2023 recipient of the National Association of Environmental Management’s (NAEM) 30 over 30 Award for excellence in the practice of occupational safety and health and sustainability, and the American Society of Safety Professionals (ASSP) 2024 Safety Professional of the Year for Training and Communications, and the recipient of the ASSP 2023-2024 Charles V. Culberson award. He is a much sought after master trainer, keynote speaker, podcaster of The Risk Matrix, and author of numerous articles concerning occupational safety and health.