Is ESG dead or has it just grown up?

By Dr Neil Patrick

Donald Trump’s inauguration speech had some executive orders that will have an impact on ESG in the USA, and they might well ripple out elsewhere. Is this the end of ESG & Sustainability? Or is this just a bump in its journey and one country’s leader doesn’t define its evolution? What can we expect for 2025?

I will cover 5 themes in this article as I see them as key dimensions for this subject. It’s a complex and interlinked landscape, but I think there are some strong currents not yet fully represented that will win out.

  • ESG/Sustainability markets – evolution since around 2021 and how this can drive corporate direction.
  • Complex geopolitics – new governments potentially shifting towards climate change sceptics, tariffs changing availability of green solutions in-country, leading to reassessment of sustainability projects.
  • AI and power generation – a huge trend worth exploring in this context.
  • Company behaviours (are they green) – their attractiveness to employees, partners, investor funding.
  • Individual actors as employees or entrepreneurs – who they choose to work for, who they invest in privately, what businesses they choose to set up.

ESG/Sustainability markets

Anecdotally, ¾ of an investor meeting in the early 2020’s was taken up by grilling and advising companies of their ESG and sustainability programs. ESG funds were popping up all over the place as well. Fund managers divested from company stocks over sustainability concerns (e.g. failing to meet ESG expectations, failure to engage with management, quality control measures not adequate and products not up to scratch).

Many fund houses started adding small-scale ESG elements onto existing funds, and sustainability became a consideration in stock picking across most of their portfolios. Even those that weren’t ESG specific. In some cases this was done with little regard to holdings, with managers making only small tweaks to funds before relabeling them.

That prompted accusations of overstating fund sustainability credentials, ultimately leading to regulatory action. The EU introduced the Sustainable Finance Disclosures Regulation in 2021 requiring market participants to justify the sustainability claims of their financial products. In September 2023 the US Securities and Exchange Commission brought in a new rule requiring funds to invest in line with their names. In November 2023 the UK’s Financial Conduct Authority confirmed a new regime for the use of the labels “green”, “sustainable” and “ESG”.

There has been an understandable backlash from investors, no longer pushing for ESG-driven change – especially in the USA. The phrase “ESG tourists” was coined for asset managers who jumped onto the ESG bandwagon early in volume with less authenticity than would be warranted. An FT article quotes Larry Fink, chief executive of BlackRock (world’s largest asset manager), saying it was for governments to play the role of “environmental police”, not the fund managers. He later said he had stopped using the term “ESG” as it had been “weaponized” by people at both ends of the political spectrum.

And bringing this trend right up to date, in August 2024 Goldman Sachs’ fund division announced they will leave investor engagement group Climate Action 100+, as have other financial services companies which have pulled out amid a political backlash in the United States. Republican lawmakers have criticized the fund managers for potentially breaching antitrust rules, by pressuring companies to cut climate-damaging emissions.

Interestingly there is less contention over the disclosures themselves, which is where companies reveal and quantify their environmental impact – both in the locations they impact and on the business itself. Companies still want a way of reporting their sustainability credentials in a good light.

Complex geopolitics

I’m watching the USA with nervousness but some grudging admiration for the showmanship, due the flurry of clearly supporter-pleasing executive orders signed by President Donald Trump. But bear in mind though that executive orders are subject to legal challenge and the US is nothing of not litigious. They are not yet final conclusions, and already the legal challenges and blocks have started.

However, as in his last presidency Trump signed off on withdrawing the US from the Paris Agreement (though he has not set any timelines). He has signed a letter stating he plans to withdraw the USA from the UN Framework Convention on Climate Change. He also stated he wants to remove the US from participating in COP negotiations, and global climate cooperation more broadly.

Continuing, he has suspended new federal offshore wind leasing pending an environmental and economic review, revoked Biden’s target of 50% vehicles sold in 2030 to be EV’s, and halted distribution of unspent funds from a $5bn pot for vehicle charging stations. But it’s not so simple: the California Air Resources Board regulates Californian emissions and several other states follow its standards. A federal challenge to this will impact Tesla as zero emission credits are a big source of funding for Musk’s company, who is Trump’s new best friend and likely leader of the new Department of Government Efficiency (Doge).

Trump has also halted funding for Joe Biden’s Inflation Reduction Act of 2022 which mandates around $470billion to green technologies. But a large percentage of the cash flows in to Republican states which would make it challenging for Trump to annul the policy.

In a 2024 address Florida governor Ron Desantis said “Last year, Florida passed record protections against the ESG Agenda wreaking havoc through the financial sector. This year, Florida has taken additional steps to continue efforts to kneecap ESG in Florida.” Elsewhere he has said ESG investing “sacrifices returns at the altar of the select few, unelected corporate elites and their radical woke agendas.”

But while the Trump camp seeks to ‘liberate’ the USA from a statutory green agenda, bear in mind that the EU CSRD regulations apply to all companies that have securities listed on an EU regulated market, or meet revenue thresholds through operations in the EU. He’s also looking to unpick and weaken DEI requirements in the USA. But there is another EU regulation, the  Corporate Sustainability Due Diligence Directive (CSDDD) that includes DEI (as well as other sustainability clauses) and which will start to apply to in-scope non-EU companies during 2027 & 2028 – during Trump’s term in office.

Elon Musk has been a strong believer in sustainable energy and has defended the importance of transitioning to sustainable energy, in 2020 he said “we must also solve the pressing environmental problems on Earth, like climate change.” He promotes the environmental credentials of Tesla but not at the expense of quality. Possibly inconveniently Musk’s companies had 100 contracts among 17 federal agencies last year. Clearly a delicate balancing act is required with Trump in power.

But: America is also all about innovation and entrepreneurs, and while Trump won the collegiate vote, around 50% of the votes were for him. There is still the other 50% who do not hold his views. So I wonder how much of what we hear is rhetoric, trying it on, and brand management. Interestingly and perhaps underlining this, under trump’s previous presidency solar power capacity doubled and wind was up 50% because the economics of green technology is working: solar and wind is so much cheaper than oil and gas. And under Biden the USA has grown to be the biggest oil producer the world has ever seen – it produces 30m barrels of oil per day.

China is the world’s largest emitter of greenhouse gases (though USA is the most per capita). And yet China is transitioning towards a low-carbon economy faster than any other country. It has goals to curb peak carbon emissions by 2030 and achieve carbon neutrality by 2060, as outlined in its 14th Five-Year Plan. The country has 180 gigawatts of utility-scale solar and 159 gigawatts of wind power under construction, twice as much as the rest of the world combined. Chinese technologies in solar, wind, batteries, and electric vehicles now match or outstrip Western counterparts, demonstrating innovation at scale and speed.

Chinese companies have a unified sustainability implementation framework, and there is a proposed ISSB-based national standard for corporate sustainability disclosure by 2030, setting Chinese businesses up for a seamless global trade and environmental compliance alignment. China is committed to nurturing carbon markets, expanding opportunities for businesses to embrace carbon accounting and sustainable practices.

Perhaps not surprisingly EU’s tariffs on Chinese EVs range from 7.8% to 35.3% while US and Canada have imposed a 100% tariff across the board.

AI and power generation

This is an interesting intersection between sustainability, government policies, and business. Governments want to attract businesses to foster physical centers and a culture of business innovation in-country. This attracts corporate investment, innovation and startups, leading to employment, growth and a strong economy.

Artificial intelligence (AI) has been, and will increasingly, drive demand for large data centers, and therefore the energy to power and cool them. In fact AI’s need for power is so great that existing infrastructure can’t keep up. AI data centers also consume a large amount of water to cool them and raw materials to build the computers and chips, with yet more environmental impact.

Some data points on data center energy consumption are worth mentioning. The China Telecom Inner Mongolia Information Park requires approximately 150 megawatts of electric power to run. The larges server room in the world at the Citadel in Reno USA requires 130 megawatts. A typical coal-fired power station can generate around 650 megawatts on average. Nuclear power station Three Mile Island (yes, meltdown in 1979) should be able to generate 835 megawatts when it is brought back online: enough to power all of Philadelphia’s homes, or 6 large data centers.

A rack of traditional servers consumes about 0.007 megawatts. A rack of AI servers can consume between 0.03 and 0.1 megawatts. Training Chat GPT-4 consumed over 50 gigawatt hours, the amount required to power around 3,600 US homes for a year. Training Chat GPT-3 emitted 502 tons of CO2, similar to driving a car to the moon and back. But the AI industry does not want to be blamed for damaging the climate further. In the absence of other suitable energy sources, nuclear energy is perfect fit for electricity generation.

Amazon purchased a data center in March 2024 adjacent to a nuclear power plant in Pennsylvania, with a 300 megawatts requirement. Amazon later requested another 180 megawatts.

Microsoft have signed a 20-year deal (still to be regulator-approved) with owner of the Three Mile Island plant, Constellation Energy, to secure enough carbon-free electricity into electricity grid operator PJM, to match that consumed by its data centers in the PJM Interconnection.

Google is to support Kairos Power with a 500 megawatt development agreement.

For those companies who can’t buy a large nuclear power station there is a growing interest in Small Modular Reactors (SMR) and, unfortunately for the planet, oil and gas generated electricity. But the tech companies do actually care about the carbon footprint AI is creating.

It has been estimated that Microsoft, Meta, Amazon and Alphabet (Google’s parent company) generated 32million tonnes of CO2 emissions in 2022. This is the equivalent to the annual emissions of Denmark. Yet Microsoft plan to be carbon negative by 2030 (even if via carbon credits), Meta and Google are aiming for net zero by 2030, and Amazon by 2040.

Google and BlackRock announced a partnership to develop 1 gigawatt of solar capacity in Taiwan. The partnership aims to increase clean energy in the region and help Google achieve net-zero emissions by 2030.

In terms of carbon free energy, wind and solar are cheaper than other sources. In 2023 in the USA, solar cost between $24 and $96 per megawatt-hour (MWh), while wind cost between $24 and $75 per MWh. In comparison, natural gas cost between $39 and $101 per MWh. In the UK the cost of new wind turbines and solar PV panels was between £41 and £48 per MWh, while the cost of new gas-fired generation was £124 per MWh.

Google and BlackRock announced a partnership to develop 1 gigawatt of solar capacity in Taiwan. Amazon was the largest buyer of renewable energy globally in 2023, purchasing 24.8 gigawatts. Next was Meta at 10.9 gigawatts, Microsoft at 10.1, and Google at 8.8 gigawatts. Of the 10 leading cloud service companies and 15 leading data centre companies, 8 have a 100% renewable energy target for 2030. These companies operate outside of governmental policies and are driven by factors such as market share & competition, innovation, profit, but also brand.

I wouldn’t be surprised if the rush to AI tech is going to be the biggest market and investor driver in the growth of carbon-free energy production and innovation. It will be interesting to see if the Chinese AI app DeepSeek is as revolutionary as is being claimed. I would expect that a Moore’s law effect applies to AI as much as traditional IT chips.

Energy transition to carbon-free is also going to be an interplay between market forces and government policy. For example the UK doesn’t currently have energy production for big scale data centers. In January 2025, England Prime Minister Kier Starmer launched a plan to leverage AI for a national renewal and growth injection. He intends to create “AI growth zones”, boosting public computing power and creating an AI Energy Council, which will bring together energy providers and big tech to identify solutions to meet AI’s energy demand. In December 2024, Starmer announced that the UK had secured a £1 billion investment in offshore wind from ScottishPower, and energy secretary Ed Miliband announced plans for reaching 95% clean energy in the UK by 2030. Crucially, the plan is to give ministers the final say on approving large onshore wind farms rather than local councils where opposition has been fierce.

The disadvantage of solar and wind energy is it can’t be stored and supply is intermittent. Current eclectic technologies include battery storage systems, pumped hydro storage – including projects using high density fluids, compressed air energy storage, molten salt thermal storage, advanced flywheel systems, and hydrogen production via electrolysis.

A really interesting and innovative concept is that of Vehicle to Grid (V2G). EV’s batteries are used as an energy storage system whereby they can charge up their batteries when there’s less demand on the electricity grid (e.g. night), and discharge back into the grid when there’s more demand (e.g. day). Owners of Renault 5 EVs in France can now earn money by selling surplus power to the grid operator. The UK Bus2Grid project in London tested the world’s largest vehicle-to-grid project, equipping nearly 100 new zero-emission electric buses with bi-directional chargers.

Company behaviors

Trump’s blustering aside, I think we are in a ‘crossing the chasm’ state with corporate sustainability and ESG strategies. Except in this case the adoption gap between early and mainstream markets is not so much technical as policy and ethics.

It’s probably driven by both commercial factors (beating competition, reputation, attracting investment & talent) and ethics (save the planet for the next generations, taking pride in being a good global citizen).

While the markets and investors have recently been through an ESG ‘reset’, what we’ve seen as ongoing activity in 2025 with our customer engagements and what I read is:

  • Most people we talk to believe climate change is accelerated dramatically by humankind’s activities, and it is their corporate duty to reverse the situation.
  • Net zero or carbon neutral targets remain as strategies, are deployed as policies, and are documented in annual reports.
  • Sustainability disclosure reporting is taken seriously.
  • Where regulatory reporting is required (e.g. CSRD) or other disclosure frameworks (e.g. WEF, GRI) have been used in the past, they continue to be used.
  • Physical climate risk (drought, fire, flooding, extreme heat) and its impact on people and corporate performance is an emerging risk to be tracked.
  • Double materiality assessments, and tracking sustainability impacts, risks and opportunities, are important business tools and continue to be used. Ignoring this process can miss value creation or worse mispriced risks and exposures.
  • Companies try to calculate Scope 1, 2 and 3 emissions accurately, and surveying the supply chain for their carbon footprint is done as thoroughly as is appropriate, or possible.
  • Organisations want to include ESG risk and compliance activities with general financial and operational risk management. Risk-based pragmatism is being applied.
  • There is an active interest in circular economy and bio-mimicry approaches.
  • There are many exciting and innovative organisations releasing goods and services to help the environment.
  • Organisations recognize the need to align employee growth, morale, and leadership culture with sustainability goals.
  • A LinkedIn study found that the global demand for green talent increased by 11.6% from 2023 to 2024. Globally, the hiring rate for green talent is 54.6% greater than for the overall workforce. In the US the hiring rate for green skills is 80.3% higher than the overall hiring rate.

So if there is a softening to the letter of ESG law, there isn’t one to the spirit of it.

It’s also worth making particular mention of what organisations in developing countries are doing. They and their countries are more at the effect of than causes of global warming, and in general don’t have access to the resources that first world organizations do. The $300 billion per year New Collected Quantified Goal agreed at COP29 is intended to help poorer countries transition to clean energy and adapt to climate change, but has been roundly criticized as woefully inadequate. So they will either have so secure other funding or self-fund projects, somehow.

Sustainability initiatives are likely to focus on local physical and social impacts, including basic utilities like clean water and electricity; sanitation; local community engagement, ad-hoc programs and local nature-based solutions. My assumption is aligning with global sustainability standards and reporting frameworks will be a nice to have. But there will be a strong inclusion of sustainability and an emphasis on biodiversity, a circular economy, localized low infrastructure innovation, and taking the unique challenges and opportunities in developing countries into account.

An example of innovation at fanning innovation is India’s rapidly growing market in electric scooters with swappable batteries. The government is pushing for sustainable transport options and reducing carbon emissions dependency on fossil fuels. The Indian electric scooters and motorcycles market size was estimated at USD 681.3 million in 2024, with a CAGR of 66.4% during 2024-2030. This is ripe for spreading outside of India.

Individual actors

The average temperature in 2024 was 1.6°C above pre-industrial levels, making it the first year that the 1.5°C target was exceeded. In fact since July 2023, except for July 2024, every month exceeded the 1.5°C threshold. The expected trend is towards an increasing average temperature, not decreasing. A warmer world intensifies the severity and frequency of extreme weather events, with impacts on sea level rise, heatwaves, polar ice, biodiversity, health, drought, crop yields and ecosystems. All of which we are seeing already, all around the world. People around are taking notice and country boundaries make no difference here. I believe they want to and will make a difference, wherever they can.

It’s not easy to dissect individual’s motivations because they are essentially unique. But I have made use of two sentiment analysis studies for some trends.

A late-2024 UK study looking at political ideologies found that environmentalism is the most well received of the 12 ideologies they ranked, with 64% of Britons being in favor vs 18% against. Four 4 of the 5 main political parties in the UK rate environmentalism highest.

The second sentiment analysis study conducted at the end of 2024 focused on sustainability only. In its fourth year, the study examines what consumers in the UK and US think about sustainability and business. They arrived at ‘5 lessons for business’:

  1. Don’t confuse cynicism for disinterest. Only 6% of Americans and 4% of Brits trust large corporations completely, and over a third in both countries don’t trust them at all. Most also think corporates are causing the world’s problems instead of solving them. As to sustainability, 74% of British adults say that businesses should commit to reducing their impact on the environment. In the US only 34% believe businesses do not have the power to convince people to behave more ethically.
  2. Pay attention to and communicate quality. An experiment was run to find out which sustainable features consumers are most willing to pay for when purchasing a T-shirt (vegan, handmaid, locally made, recycled, carbon-neutral, eco-friendly). They discovered handmade, implying sustainability as well as quality and care, had the highest price threshold. Second-hand, without a sustainability message was lowest. The others, all with green attributes, didn’t especially increase or decrease the perception of the T-shirts being too expensive. In other words quality still matters.
  3. Don’t expect consumers to pay (much) more. Approximately three-quarters of consumers in both the UK and US consider cost when buying products, only one quarter consider whether products have been made in an environmentally friendly way. However, consumers do want to act sustainably, and already engage in sustainable behaviors on a day-to-day basis where they can (e.g. recycling, reducing food waste, energy efficient devices, installing solar power).
  4. Be conscious of the age divide. While cost can be a barrier to sustainable behavior it is not consistent across age ranges. Young people will pay much more than older generations for all types of products if the companies can show they protect the environment. Putting some numbers to it, as an average across all the attributes tested for a 50% price threshold purchase, for 18-34 year olds it is £70, compared to £33 for 55 year olds or older.
  5. Ignore the noise, consumers care about the climate. In spite of the media headlines, businesses should keep in mind that the public’s concern about the climate is steadfast. While not on par with for example healthcare, defense and the economy overall, it is still seen as critical. Air and waste pollution, extreme weather and deforestation are seen as urgent. When considering if environmental issues are urgent or not, less than 3% thought they were not. Sustainability is still critical to consumers.

In a different study, a Net Impact report found that 52 per cent of workers have considered leaving their job due to the poor sustainability performance of their employer. Likewise, the Society for Human Resource Management reports that 75% of executives say that ESG initiatives have a positive impact on employee engagement. Employees at companies deemed genuinely committed to sustainability reported a substantial 16% increase in engagement levels.

A 2023 Deloitte survey found that climate change is a major concern for Gen Z and Millennial’s, with more than 70% saying that they are actively trying to minimize their impact on the environment. More than 40% of Gen Z and Millennial’s have changed jobs or sectors due to climate concerns, or plan to do so in the future. Around 55% of respondents reported that they research brands’ environmental impact and policies before accepting a job, and more than 40% reported that they already have, or plan to, change jobs due to climate concerns. These are the future shapers of business.

My Conclusions

There is a quote attributed to French writer Victor Hugo which I think is very appropriate for where we all are in our sustainability journey: “No army can stop an idea whose time has come”. I believe the acceptance of humankind accelerating global warming is the idea whose time has come. I would cast the “army” as for example market makers and nay-sayers, I think they will eventually be left in a slipstream from scientific, technical and business innovation all striving to solve our climate change problem.

  • We are in for an uncertain, sometimes contradictory, but certainly bumpy ride in the sustainability journey over the next few of years. Until things harmonize I think there will be an uncomfortable husking of anti-ESG noise, and an ugly patchwork of central government, local government, and ad-hoc ESG relevant activities and projects.
  • Organisations, especially globals, follow the money and also want to improve their brand. Government policy in a country, which let’s face it, last as long or less than the tenure of the incumbent, will have some localized medium-term impact on sustainability. But I do not believe it to be a defining force globally. Rather there are other forces, some I list below, that will individually and collectively drive organisation’s sustainability activities.
  • Sustainability disclosures will continue. If anything, I expect their importance will grow. Indications are reporting frameworks will harmonize around some global themes if not actual metrics. They will be a set of figures for comparing any organisation’s performance anywhere in the world with equality, as well as evaluations for investments and partnerships. Organisations’ disclosures will need to be audited for accuracy and data linearity, and signed off at an executive level to demonstrate accountability. I think meeting of various regulations will be as a consequence of this activity, rather than the cause of it.
  • The knock-on effect of the above point is that organisations will need to invest resources in collecting, measuring and calculating disclosure values. Considering the complexity of assessing Scope 3 GHG in the full value chain, this is no small task.
  • While there is an evident skepticism of ESG markets, that is not the case for sustainability. Yes there are hot spots in the USA against the climate change assumption as a now de-fact truth, but it is not uniform in the USA or elsewhere around the world. Capital goes where it is needed, valued and treated well. I believe we are heading for a bonanza of sustainability-based investment opportunities, ranging from localized small scale agile to large corporate & globally driven. There is an indication of a full circle and markets for sustainability, and there is money to be made. Maybe a bit more patchy than before.
  • Biodiversity habitat protection is emerging as a focus. The consequences on world food production are probably catastrophic, globally, in a very real sense, if this is not addressed.
  • Corporate governance of sustainability is more important now than ever. The internet, and now free to use AI large language search models, truly make any organisation a very visible member of the global village. Increasingly, sustainability achievements will be a competitive advantage.
  • Sustainability activities will be added to normal business operations, will become more mainstream, and the overall cost of implementing sustainability policies will reduce.
  • Energy storage for intermittent energy sources like wind and solar will be a growing research and innovation field.
  • Green washing & contamination litigation, and outing on social media, will increase. As will activism around localized high-pressure impacts of climate change.
  • I anticipate that the large oil and gas producing companies will start to see a decline in the need of their products and will have to shift their attention, meaningfully, to carbon-free energy alternatives. Related, our dependence on Russian oil was a big lesson learned. Big tech companies driving our AI use will also play a part. Once their colossal resources start to focus on this area, carbon-free energy production innovation will be significant and rapid.
  • Individuals are driving organizational behaviors, either from within the organisations or from the outside as consumers. I believe this is a groundswell that is growing, if somewhat opaque at present due to ‘noise’. Younger generation consumer choices are ethically weighted. They will already spend more if they can see a benefit to the environment, they will choose employers based on their provable green credentials. These age-groups, and those following, are replacing the older generations and with that their older beliefs. Times they are a changing.

Whether you call it ESG, sustainability, responsible investment, or something else, there is a growing global response to the potential catastrophe of global warming. It is not dead, it’s just that it has had a noisy growing up.

The Author

Dr Neil Patrick

Global Director Client Services at Winterhawk. I was formerly in the Center of Excellence at SAP and was the Solution Manager of SAP Risk & Assurance Management (RAM). I am passionate about ESG topics helping businesses in their journey towards delivering on their business objectives.

Feel free to reach out to me (info@winterhawk.com) if you would like to know more how Winterhawk supports organizations around the world, providing solutions tailored to their business goals and sustainability objectives. Our Risk Optimization approach helps organizations achieve maturity, focused around pain points and operational weaknesses.