The mayhem around ESG intensifies

The mayhem around ESG has surged since the beginning of the year, and you probably only need one guess as to why. 

Things are hotting up around environmental, social, and governance (ESG) investing – a movement that, just a few short years ago, was supposed to be the future. For years, it seemed unstoppable, but now it’s being tested. If it is genuinely going to be an evolution of capitalism, as some analysts suggested, the road will definitely be bumpier than we thought. 

2025 is the year of backlash, motivated mainly by the change of government in the US. To put it simply, the Trump administration sees ESG less as a new way forward and more as a punching bag. Many corporate giants are disowning it or shutting up about it. All others are wondering what to do next. 

It’s the big question for boards: where do they go from here, where there’s so much hostility to a movement that still commands a lot of investment and, in many countries, deep legal backing?

Investor support for ESG proposals is waning. According to a report from ShareAction, only 1.4% of ESG-related shareholder resolutions won majority approval in 2024, and while that covers the US, it also includes the UK and EU – places where ESG was supposed to have strong backing. 

These resolutions are not legally binding, but they can – and often do – pressure boards into shifting their goalposts. 

One of the main drivers of success for resolutions is whether they have the support of any asset managers who might have a stake in individual companies. But the same report found that the most prominent managers in the world, including BlackRock, Vanguard, State Street, and Fidelity, backed just 7% of these resolutions. 

It also found huge geographical discrepancies among asset managers in general, noting that those in Europe backed 81% of resolutions and those in the US-backed only 25%. It hammers home the idea that ESG lives two separate lives at this point, which isn’t easy to navigate as a cross-border business.

Absolutely. With Donald Trump back in the White House and Republicans solidifying their influence on business across the US, ESG is going to have an even tougher time there. The administration has already rolled back climate-related rules and made it harder for investors to push companies on sustainability. Trump’s SEC leadership is shifting power away from shareholders and back to corporate boards, which means fewer ESG resolutions making it to a vote in the first place.

And then, globally, the picture is different but equally puzzling. Europe still sees ESG as essential, with regulations like the Corporate Sustainability Reporting Directive (CSRD) making sustainability reporting mandatory. Many Asian markets are also ramping up ESG requirements, particularly in finance. 

If ESG is a divided world, we can expect the trends in one to spill over into the other all the time, creating more headaches for anyone caught in the middle.

The smartest thing corporate leaders can do right now is read the room. I.e., focus on your stakeholders and what they want. This is one of the foundational principles of good corporate governance, but it always helps to remind ourselves of that in times like this. 

If your investors, customers, and regulators care about ESG, then ESG should be a priority. You’ll need the right strategy and trained talent sitting on your board who will be able to offer the proper guidance when called upon.  

If your stakeholders don’t care about ESG, forcing the issue could create more problems than it solves. There’s no universal ESG playbook anymore—what works in Frankfurt might be poison on Wall Street. That means businesses need to take a more strategic, tailored approach.

For companies operating in multiple markets, this balancing act is even trickier. It’s not just about compliance—it’s about messaging. How do you talk about sustainability in a way that resonates with European investors but doesn’t alienate US stakeholders? How do you maintain ESG commitments without getting caught in the political crossfire? This is where adaptability is key. Training executives and board members on regional ESG dynamics, keeping an ear to the ground on regulatory shifts, and crafting flexible ESG strategies will be essential.

The ESG landscape has diverged, and businesses can no longer afford to take a one-size-fits-all approach in that kind of mayhem. While the movement still holds weight in many parts of the world, the political and financial headwinds in the US are impossible to ignore. Corporate leaders need to be pragmatic—ESG isn’t dead, but it’s no longer a guaranteed win. The companies that succeed will be the ones that can navigate these shifting tides without losing sight of what matters most to their stakeholders.

The mayhem around ESG – The Corporate Governance Institute