For years, ESG (Environmental, Social, and Governance) was hailed as the future of business. It promised a framework where finance and corporate behavior aligned with climate action, human rights and ethical governance. Regulators embraced it, investors poured trillions into ESG-labelled funds, and CEOs pledged allegiance in glossy annual reports. For a while, it seemed unstoppable.
But today, ESG is in retreat. Its very name has become almost toxic, dropped from corporate communications and stripped from funds once proud to carry the badge. A movement that once dominated boardrooms and investment committees is now faltering under the weight of political backlash, regulatory retreat and investor disillusionment. The obituary may not yet be fully written, but the signs of slow death are unmistakable.
Europe falls first
The cracks began to show in Europe, ESG’s spiritual home. Germany’s Supply Chain Act (LkSG), once touted as a flagship measure to enforce accountability across global supply chains, has quietly lost its teeth. The German government recently moved to abolish the law’s annual reporting obligation altogether. It was never enforced to begin with, and now it will vanish. Companies will still need to document their diligence, but gone is the public accountability. In Brussels, the European Commission has followed a similar path, launching a sweeping “simplification” agenda to cut regulatory red tape, including ESG reporting obligations. What was once framed as Europe’s bold sustainability architecture has been steadily dismantled under the pressure of economic costs and political resistance.
Investors, too, have begun voting with their feet. Europe has just recorded its first-ever net outflow from sustainable funds, a sobering $1.2 billion. In 2022, nearly 700 new ESG funds were launched across the continent; by 2023, that number had halved. By 2025, the tide had turned, with record amounts of money pulled out of Article 9 funds, the EU’s most ambitious ‘dark green’ investments designed to put sustainability at their core.
Some of the world’s largest institutions are retreating from ESG-linked strategies altogether. Executives at UBS, HSBC, BP and Starbucks have quietly stripped climate and ESG targets from bonus schemes, no longer willing to tie pay to commitments seen as unreliable or politically fraught. And in a symbolic blow, one of Europe’s largest pension funds pulled €14 billion from BlackRock, citing concerns over ESG voting and credibility.
A deafening silence
Perhaps the most telling sign of ESG’s decline is the silence. Hundreds of European funds have dropped the term “ESG” from their names this year. Companies continue to act, conducting sustainability checks, measuring emissions and screening supply chains, but they no longer broadcast it. This phenomenon, dubbed “greenhushing,” reflects the new reality: ESG is seen as more liability than asset in the public arena. Even BlackRock, once the poster child of ESG evangelism, has stripped its annual chairman’s letter of any reference to ESG, DEI, or climate change.
Cultural and political backlash has accelerated the collapse. In the US, ESG has been branded as “woke capitalism” and outright banned by Republican-led states. Elon Musk dismissed it as a “scam.” In Europe, farmers have staged mass protests against pesticide regulations, prompting leaders like Emmanuel Macron to call for a “pause” on the Green Deal. A GlobeScan survey now shows that 70% of experts across countries believe backlash against sustainability is intensifying. DEI, ESG’s sibling, has fared no better. Legal challenges to race-based hiring, combined with corporate scandals, have led many firms to dismantle diversity programs almost as quickly as they built them.
A vanishing “act”
But ESG is not vanishing entirely. It is mutating. Policymakers in Brussels, faced with a war in Ukraine and rising geopolitical tensions, are even reconsidering defence and nuclear industries as compatible with ESG frameworks. Once excluded as incompatible with “sustainable” investing, defence is now being reframed as essential to Europe’s resilience. The alphabet soup of ESG may be shrinking, but the values of sustainability, resilience and accountability remain alive, only repackaged under less politicised labels.
This of course raises the question: Is ESG truly dying, or merely evolving into something else? On one hand, the movement as it was originally conceived to be inclusive, regulatory-heavy and the moral compass of finance, is collapsing. On the other hand, investors still want long-term stability and sustainability remains a business imperative. What is disappearing is not the practice of sustainable business, but the politicised language and inflated promises that surrounded ESG.
The death of ESG is less a burial than a quiet retreat. Companies will continue to measure, adapt and mitigate risks linked to climate and governance, but they’ll do so behind the scenes. Publicly, they will talk about “responsible business,” “resilience,” or “sustainable growth.” ESG as a term may be on its last breath, but its legacy, however messy, will likely shape the frameworks that come next.
The era of ESG orthodoxy is over. What comes after may be leaner, more pragmatic and less ideological. But for now, we are watching the slow death of ESG, one regulation, one fund outflow, and one rebrand at a time.
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