In his 2020 letter to investors, Larry Fink, chief executive of BlackRock, the world’s largest asset manager, mentioned ‘ESG’ 26 times. By the time of his 2023 letter, the term had disappeared entirely. At the Aspen Ideas Festival that June, Fink explained why. “I’m not going to use the word ESG because it’s been misused by the far left and the far right,” he said. “I’m ashamed of being part of this conversation.”
Fink is not alone. These days executives are far more likely to utter ‘AI’ than the three letters that until recently dominated corporate virtue-signalling. How do we incorporate ESG in our value chain? has become, How do we incorporate AI in our value chain?
To its critics, this looks like a lot like a retreat from ESG, but it has neither collapsed nor been superseded by AI. It has simply become boring. And boring, in corporate governance, usually means consequential.
The shift registers most clearly in who does the work. A Deloitte study of insurers subject to the European Union’s Corporate Sustainability Reporting Directive (CSRD) found that 76 per cent had assigned accountability for sustainability reporting to the chief financial officer (53 per cent) or jointly to the CFO and chief sustainability officer (23 per cent). When ESG meant reputation, it sat in communications; when it means compliance and capital allocation, it shifts to finance.
This matters because finance people ask awkward questions. A chemicals firm cutting emissions needs process engineers who understand catalytic converters and heat recovery, not communications staff crafting lovely narratives. Decarbonising a supply chain requires procurement specialists negotiating with hundreds of suppliers, mapping emissions through complex production networks. None of this makes for potentially viral LinkedIn posts.
Exclusion, engagement, materiality
The investor side has matured, too. Early ESG was dominated by exclusion, by screens that avoided tobacco, weapons, and fossil fuels. That approach said nothing about whether the remaining holdings were well managed. A second wave brought engagement: asset managers demanding better disclosure and strategy from portfolio companies. The third phase, now emerging, focuses on materiality. Which ESG factors actually affect financial performance for this specific company in this specific sector?
The answer varies wildly. For a miner, water usage and tailings-dam safety are existential. For a software firm, neither matters much; data privacy and workforce diversity do. The one-size-fits-all ratings that proliferated in the 2010s—where MSCI might score a company A while Sustainalytics rated it high-risk—have been exposed as crude. Sophisticated investors now build proprietary models, or focus narrowly on specific factors they can actually evaluate.
A Deloitte survey of more than 2,100 C-level executives across 27 countries found that 85 per cent increased their sustainability investments in 2024—up from 75 per cent in 2023. Almost half said sustainable business model transformation had become central to their overall strategy. The political noise, it seems, has not translated into operational retreat.
Some companies have misjudged the moment. They see the rhetorical retreat from ESG as a licence to disengage, or assume American political headwinds (Donald Trump is not a fan) mean sustainability no longer matters. Both are wrong. The demands have grown more exacting, not less. Firms that abandoned substance because the branding dividend vanished will face awkward questions from regulators, lenders and customers who now expect proof.
RIP to ESG?
The firms adapting best share certain traits, such as setting fewer targets that are nevertheless far more tightly defined. They make explicit trade-offs, such as acknowledging that expanding into some markets conflicts with certain social standards, rather than pretending otherwise. Shorter feedback loops between action and measurement help, as does a willingness to admit what they do not yet know.
Anne Simpson, global head of sustainability at Franklin Templeton, put it well. “RIP to ESG,” she told TIME. “Not because we think this is an end to this, but because it’s a beginning.”
Dull stuff. But consequential dull stuff. The future of sustainability will not be announced at Aspen, or Davos. It will be measured, audited and, eventually, priced.
Photo: Dreamstime.
