Once central to corporate climate pledges, ESG is now facing backlash — and a rethink.
Former U.S. climate envoy John Kerry is calling for a rebrand of environmental, social and governance (ESG) investing, Reuters reported this week, warning that the once-popular framework has become a political flashpoint. The debate isn’t just about language — billions are on the line. Just last month, the Department of Energy scrapped $13 billion in green energy projects, sending unused funds back to the U.S. Treasury. Speaking at a sustainability forum in New York, Kerry said the acronym has been “weaponized” by critics and risks undermining broader climate and corporate accountability goals.
Kerry argued that while companies should still prioritize emissions cuts, diversity, and good governance, the term ESG has become so polarizing that it now distracts from the underlying mission.
“The work matters. The label doesn’t,” he said, urging businesses and investors to shift the language without abandoning the principles.
ESG in Retreat
Over the past two years, ESG has faced heightened scrutiny in the U.S., particularly from conservative policymakers who view it as corporate overreach into politics. Several Republican-led states have passed laws restricting public pension funds from considering ESG factors, while lawsuits challenge financial institutions for alleged “climate collusion.”
The backlash has already led to a decline in new ESG-branded funds in the U.S. — even as Europe and parts of Asia continue to see growth. In 2023, U.S. ESG fund inflows fell to their lowest point in nearly a decade, according to Morningstar. Critics argue that ESG ratings are inconsistent and sometimes misleading, while supporters maintain they help investors account for climate and social risks that directly affect long-term value. Kerry suggested a reset may be overdue: “ESG probably ought to mean efficiency, security and growth.”
But the question remains whether a new label would insulate the idea from future political attacks. Ideological opponents have often turned neutral terms and technical acronyms — like DEI — into flashpoints. If ESG is following that same path, a rebrand may shift the language but not the underlying battle.
Not Just Semantics — Real Stakes
For the power and utilities sector, the debate goes beyond Wall Street branding. ESG frameworks have shaped how investors evaluate emissions disclosures, grid modernization plans, and workforce diversity — key issues in an era of surging electricity demand and pressure to decarbonize. Investors increasingly want transparency on how those costs — and climate risks — are managed. Rebranding ESG may change the language, but not the underlying demand for disclosure.
Kerry’s remarks add to a growing recognition that climate-minded finance may need to shed the ESG acronym while keeping its goals intact. Some firms are already pivoting toward terms like “sustainable investing” or “climate risk management.”
Whether a new label can rebuild consensus remains uncertain. But for energy companies, the bottom line is clear: investors, regulators, and consumers still expect credible action on emissions, equity, and governance — regardless of what it’s called.
