Death of ESG

How ESG died while the world burned—literally

The year 2025 has delivered the final blow to Environmental, Social, and Governance (ESG) investing. After more than a decade of promises to transform capitalism into a force for planetary good, ESG now faces systematic dismantling from political leaders, regulatory retreat from its strongest supporters, and investor exodus driven by poor performance. The movement that once commanded trillions in assets is now in its death throes, leaving behind a trail of broken promises and a planet still burning.

Trump's War on ESG: The Political Execution

Donald Trump's return to the White House on January 20, 2025, marked the beginning of ESG's systematic execution. Within hours of taking office, Trump unleashed executive orders that didn't just roll back Biden-era policies—they declared war on the entire concept of sustainable investing.

"These state laws and policies weaken our national security and devastate Americans by driving up energy costs for families coast-to-coast,"

Trump declared in his executive order targeting state-level ESG policies.

The scope of his assault has been breathtaking:

• Immediate withdrawal from the Paris Agreement for the second time

• Termination of all environmental justice offices across federal government

• Declaration of a national energy emergency to expedite fossil fuel development

• Federal challenge to state climate laws, targeting New York and Vermont's climate liability laws and California's cap-and-trade policy as "illegitimate impediments"

Trump's April 2025 executive order "Protecting American Energy from State Overreach" represents an unprecedented federal assault on subnational climate action. For the first time in U.S. history, a president is using federal power to actively prevent states from pursuing climate policies—effectively killing ESG from the top down.

House Republicans have amplified the attack through their anti-ESG working group, systematically challenging ESG investing as violating antitrust laws.

"Progressives are trying to do with American businesses what they already did to our public education system—using our institutions to force their far-left ideology on the American people," declared House Financial Services Committee Chairman Patrick McHenry.

Europe's Great Surrender: The CSRD Collapse

While Trump's ESG assault was predictable, the European Union's concurrent retreat has delivered the more devastating blow. The EU—long considered the global champion of sustainable finance—is now systematically weakening its own Corporate Sustainability Reporting Directive (CSRD) through what officials euphemistically call "simplification."

The February 2025 Omnibus Simplification Package represents nothing short of capitulation to corporate pressure:

• Two-year postponement of reporting requirements, pushing most companies from 2025 to 2027

• Dramatic scope reduction, limiting CSRD to companies with over 1,000 employees (up from 250)

• 68% reduction in mandatory reporting datapoints

• Complete elimination of sector-specific standards and reasonable assurance requirements

Patrick de Cambourg, Chair of the EFRAG Sustainability Reporting Board, attempted damage control: "These revisions aim to deliver what Europe needs at this moment: a more focused, more usable sustainability reporting system".

But the reality is undeniable—Europe has abandoned its sustainability leadership when the world needed it most.

Companies that invested millions in ESG reporting systems are now watching their efforts become irrelevant overnight. The message from Brussels is clear: when faced with corporate resistance and economic pressure, sustainability commitments are expendable.

The Great Investor Exodus: Following the Money

The political assault might have been survivable if investors had remained loyal. Instead, 2024 and 2025 witnessed a dramatic flight of capital from ESG funds, driven by poor performance, greenwashing scandals, and political backlash.

While global sustainable fund assets nominally reached $3 trillion by 2023, this growth masked significant outflows and widespread investor skepticism. The energy sector's strong performance following Russia's invasion of Ukraine exposed ESG funds' sectoral biases, providing ammunition for critics who argued ESG was "a fad whose time had passed".

Lewis Johnston of ShareAction captured the tragic irony: "In many ways, we are victims of our own success," referring to ESG's rapid growth that ultimately triggered the backlash. High-profile departures from voluntary initiatives like the Net Zero Banking Alliance created a "chilling effect" that discouraged stewardship initiatives.

The economic case against ESG gained momentum as funds consistently failed to outperform traditional portfolios, leading to "massive investor pullbacks". Companies began quietly dropping diversity, equity, and inclusion initiatives while others simply stopped talking about sustainability—a phenomenon dubbed "greenhushing".

Climate Reality Meets Climate Inaction

The cruel irony of ESG's death is its timing. As the framework for corporate climate action disintegrates, 2024 became the warmest year on record, with temperatures reaching 1.5°C above pre-industrial levels. Nature delivered devastating reminders of what's at stake:

Hurricane Helene struck Florida as the strongest hurricane on record for the region, with 219 deaths and $79.6 billion in damages. Hurricane Milton reached unprecedented intensity over the Gulf of Mexico with 180 mph winds. Valencia's floods killed 224 people when a year's worth of rain fell in hours. Brazilian floods displaced 700,000 people in the worst flooding in 80 years.

The global toll was staggering: over 11,500 deaths from extreme weather, $368 billion in economic losses, and 824,000 people newly displaced—the highest climate-related displacement since 2008. Climate disasters caused 88% of all natural disaster losses, with projections of $145 billion in insured losses for 2025.

Munich Re's chief climate scientist captured the new reality:

"We need to face it that the losses have been on the rise and make it clear that climate change plays an ever increasing role".

Yet as the planet burned and flooded, the very framework meant to address these risks was being systematically dismantled.

The Institutional Collapse

By 2025, ESG's institutional foundations were crumbling. The SEC withdrew its defense of climate-risk disclosure rules. Federal financial regulators abandoned international climate groups. Corporate sustainability officers found themselves marginalized or eliminated as companies prioritized "economic survival over ideological conformity".

Even European institutions retreated. More than 100 companies and investors signed a letter warning against rolling back sustainability rules, but policymakers prioritized competitiveness over climate commitments.

"All of those are now under threat in the name of competitiveness," warned ShareAction's Lewis Johnston.

Death Certificate: Cause of Demise

ESG's death represents more than policy failure—it marks the end of the illusion that we could solve the climate crisis without fundamental changes to how we organize our economy. The movement's fatal flaws were embedded in its DNA: the optimistic assumption that doing good and doing well were naturally aligned, vulnerability to gaming through complex metrics, and fatal association with progressive politics that made it a target for backlash.

The greenwashing scandals revealed the depth of the credibility crisis. European fund analysis showed that ESG funds with the largest outflows offered "little differentiation from traditional vehicles with no sustainability lens".

"Some investors still harbour doubts about the validity of the sustainability-related claims," noted Nordea's Eric Pedersen.

What Dies with ESG

As ESG breathes its last, we lose more than a financial framework. We lose the hope that market mechanisms could drive planetary salvation. We lose the infrastructure for corporate climate accountability. Most tragically, we lose precious time.

The movement's critics celebrate its demise while supporters mourn its passing, but the real tragedy lies in the vacuum it leaves behind. The hurricanes still rage, the floods still rise, and the planet still warms—but now we face these challenges without even the imperfect tools ESG once provided.

Colin Mayer's warning rings prophetic: "Crises are increasing in frequency and growing in intensity. Their frequency and intensity will continue to increase until we solve the problem".

promised to be part of that solution. Its death leaves us more vulnerable than ever.

The Void Ahead

Three paths emerge from ESG's wreckage: a pragmatic resurrection stripped of political rhetoric, a complete rebranding under new labels, or total abandonment as corporations return to pure profit-driven decision-making. The third seems most likely.

In this future, the market alone will determine environmental outcomes without sustainability constraints. The brief historical moment when it seemed possible to harness capitalism for planetary good has ended. The king is dead, and there is no heir apparent.

As we witness ESG's final moments, we're left with a sobering truth: if the framework designed to save the planet couldn't survive political pressure and market forces, what hope remains for climate action? The death of ESG isn't just the end of a movement—it's the end of an era when we believed the market could save us.

The planet's patience, unlike our political will, is not infinite. In ESG's death, we see our own reflection: a species brilliant enough to understand its predicament, yet too fractured to solve it. The movement that promised to align profit with purpose has failed, leaving behind a world where the two remain forever at odds.