IS ESG DEAD? | IS ENVIRONMENT, SOCIAL, GOVERNANCE (ESG) DEAD? IS SUSTAINABLE INVESTING DEAD?

After hearing all about its ups and downs, you might be wondering, what exactly is ESG? At its core, ESG stands for Environment, Social, and Governance. It is a set of practices that can be used to find a company’s value beyond simply the balance sheet. ESG practices and metrics are a way to ensure, as well as track, that a company remains healthy and sustainable for long time (financially, but also, in other ways).
ESG's path has seen its share of ups and downs. Before the COVID19 pandemic hit, ESG products and funds were growing steadily, showing a promising future.. And then, the pandemic really kicked things into high gear. Suddenly, everyone wanted in on ESG, with firms quickly labeling their products as part of this trend, leading to a surge in investments. However, now, there's quite a bit of disagreement over ESG, and we're seeing some products being relabeled to avoid the ESG tag, leading to a decrease in ESG products. While it is easy to think that it’s just ESG is declining, as that is what people tend to focus on, it's important to point out that the overall market is seeing flat flows across the board this year.
When you first hear about ESG, intuitively this idea seems good and positive, which is why many people jumped on it so quickly. But then, in just a few years, ESG has journeyed from the pinnacle of finance to becoming a polarizing topic, with some business leaders now completely avoiding it.. Political battles in some places, such as the United States, have intensified against ESG, challenging its basis. Some people and groups go so far as to be anti-ESG. In fact, at least 165 anti-ESG bills were introduces in the US in 2023, with politicians claiming that ESG criteria impact financial returns negatively. For example, New Hampshire GOP legislators introduced a bill that would make it a felony to knowingly invest any state or taxpayer funds if using ESG criteria. However, the evidence behind ESG criteria negatively impacting returns is mixed. A now politically-charged word, the term ESG is often being avoided in statements coming from organizations, with one study finding that public statements related to ESG made by large financial sector companies have declined by 20% in 2023.. There is even a new term called “green hushing”, when companies deliberately keep quiet on or avoid ESG topics for fear of negative consequences. Furthermore, companies, including very reputable ones and ones that have a focus on ESG related issues, have blatantly said that they will no longer be using the ESG label. Okay so This is looking bad…but, does this really signify doom for ESG?