The Future of ESG and Sustainability: Challenges, Resistance, and the Path Forward

There is growing discourse around the perceived overreach of sustainability policies, with some business leaders arguing that the aggressive push to meet decarbonization targets has led to backlash. Critics claim that the goal of keeping global warming within 1.5 degrees Celsius was too ambitious, unrealistic, and financially burdensome for the private sector. However, these arguments ignore why this target was set in the first place—the scientific concensus is that surpassing it will lead to irreversible climate feedback loops, escalating food insecurity, extreme weather events, mass displacement, and disruptions to Earth’s life-supporting systems. Despite this, resistance to Environmental, Social, and Governance (ESG) measures has intensified, raising serious concerns about the future of sustainability efforts in both the public and private sectors.

The Rise of Anti-ESG Sentiment

The opposition to ESG initiatives did not emerge as a direct reaction to government environmental policies. It began long before robust public policy and mitigation measures were even put in place. In liberal free-market democracies, corporate lobbying and interest groups have historically pushed back against regulation, citing concerns over profitability and market freedom. These same protections, originally intended to prevent ‘excessive government interference,’ are now being used to undermine the public interest by delaying or dismantling sustainability measures.

Despite significant resistance, the anti-ESG movement has not been entirely successful. A 2024 Harvard Law report found that 98% of anti-ESG legislative proposals faced opposition, with 96% ultimately being defeated. However, the persistence of these efforts suggests an underlying ideological shift, with some policymakers and corporate leaders attempting to reframe ESG as an unnecessary or even harmful constraint on businesses.

Rebranding Sustainability: The Return of Euphemisms

In response to this hostility, some business leaders suggest softening the language surrounding ESG. During a panel at NYU Stern, Andrew Collier from Freedom to Invest—a group challenging anti-ESG legislation—advocated for replacing “ESG” with terms like “socially responsible investing.” This rebranding, while strategic, raises concerns that companies may increasingly pursue sustainability efforts behind closed doors rather than making them central to corporate strategy. The fear of political and financial retaliation is leading some organizations to mask their ESG commitments or abandoning them outright.

The Intersection of ESG and Financial Materiality

One of the fundamental misunderstandings driving the ESG debate is the false separation between sustainability and financial performance. ESG is often framed as a non-essential metric, detached from profitability. However, ESG is fundamentally about risk assessment. Negative externalities—such as pollution, labor exploitation, and governance failures—carry financial costs. When stakeholders take action against companies that impose these costs, whether through regulatory fines, investor divestment, or consumer backlash, ESG issues become financially material.

The challenge is that investors and regulators currently demand extensive ESG disclosures without necessarily integrating these insights into financial performance metrics. If ESG reporting remains a box-checking exercise rather than an embedded component of corporate strategy, its impact will remain limited. Companies should prioritize identifying and addressing their top five material ESG risks rather than being overwhelmed by thousands of data points that obscure actionable insights.

The Time Horizon Dilemma

Investing in ESG initiatives, much like capital expenditures or workforce development, requires a long-term perspective. According to Witold Henisz from the Wharton ESG Initiative, meaningful ESG investments typically yield measurable feedback within a 24-month horizon, while transformative financial returns may take years to materialize.

This disconnect between short-term pressures and long-term benefits is one of the biggest obstacles to ESG adoption. Policymakers and corporate leaders must recognize that sustainability efforts operate on extended time horizons, requiring patience and commitment. More transparency is needed around companies’ material ESG risks, allowing stakeholders to focus on strategic priorities rather than being bogged down by excessive reporting requirements.

Economic Consequences and Policy Implications

A crucial aspect of ESG opposition that is often overlooked is its impact on municipalities and taxpayers. When companies fail to mitigate ESG risks, the costs are passed down in the form of increased capital expenses, infrastructure damage from climate disasters, and rising insurance premiums. Policymakers must emphasize this point when engaging with lawmakers—failure to act on ESG is not just a corporate issue; it is a societal and economic burden.

Data-driven analysis can play a key role in demonstrating the financial benefits of sustainability. Tensie Whelan from NYU Stern argues that sustainability efforts lead to better corporate performance and greater societal impact. However, the challenge lies in quantifying these benefits. Monetizing intangible ESG gains—such as brand reputation, employee retention, and community goodwill—remains a difficult but necessary task.

Defining ESG vs. Sustainability

Henisz distinguishes between ESG and sustainability by emphasizing their different roles in corporate strategy. ESG is a structured framework for incorporating environmental, social, and governance factors into decision-making. Sustainability, on the other hand, focuses on the long-term viability of business models in harmony with environmental and social considerations. These concepts are interconnected, but their relationship depends on whether governments and stakeholders enforce accountability for unsustainable practices.

The absence of strong ESG policies does not eliminate financial consequences—it simply shifts them elsewhere. Poor governance, environmental neglect, and labor exploitation all carry hidden costs that ultimately impact investors, consumers, and taxpayers. Better policies would enhance investor response, but even in their absence, financial markets are increasingly factoring in ESG risks.

The Market’s Role in Climate Action

Governments have largely taken a laissez-faire approach to ESG, favoring market-based mechanisms such as carbon credits, green bonds, and corporate incentives rather than implementing aggressive top-down regulation. While this approach aims to ensure broad industry participation, it has led to the securitization of climate efforts rather than the deep structural changes needed to drive true decarbonization.

In practice, this means that ESG compliance has become a business function rather than a mission-driven transformation. Climate risk has been repackaged for insurers and financiers, while many companies view ESG as a regulatory requirement rather than an operational priority. This dilution of sustainability efforts threatens to stall meaningful progress.

The Psychological Barrier to Climate Action

One of the biggest behavioral challenges to action is disavowal—the tendency to ignore or delay action because the consequences of climate change feel distant or abstract. As psychoanalysts warn, people are more likely to act when crises directly affect them. Today, climate disasters disproportionately impact marginalized communities, making it easy for luckier decision-makers to overlook the urgency of the problem.

However, this will not remain the case forever. The mounting costs of climate-related disasters—such as wildfires in California destabilizing mortgage and insurance markets—are already affecting financial systems. The question is not whether climate change will impact economies, but when and how severely.

The Responsibility of Our Generation

We are at a critical juncture. Efforts to dismantle ESG regulations and environmental protections threaten to undo years of progress. Yet, our generation, which will likely live for another fifty years, cannot afford complacency. We must balance pragmatism with ambition—demanding systemic change while working within existing structures to push sustainability forward.

The fight for ESG is not just about corporate governance; it is about economic resilience, social stability, and environmental survival. Business leaders, policymakers, and investors must acknowledge that sustainability is not an optional add-on but a fundamental aspect of long-term prosperity. As the saying goes, we must be realistic and demand the impossible—because the alternative is simply not an option.