By Jordan (JP) Sammis, F25 Environmental Clinic student
“ESG” (Environmental, Social, and Governance) evaluates how a company’s operations affect the environment, society, and its internal management practices. The environmental pillar measures a company’s greenhouse gas emissions, energy usage, sustainability, and waste; the social pillar assesses how the company affects its employees, customers, suppliers, and communities; and the governance pillar examines the company’s leadership ethics, pay equity, minority representation, and board composition.[1]
In the 1960s, Vietnam War activism, the Black Power Movement, and the Women’s Liberation Movement laid the groundwork for ESG.[2] Investors noticed this activism and growing concern over industrial pollution, environmental degradation, and associated health issues,[3] prompting businesses to consider environmental and social concerns in their decisions.[4]
In 1998, UN Secretary-General Kofi Annan acknowledged a potential alignment between the UN’s peace and development goals and business financial objectives.[5] The next year, Annan proposed a “Global Compact” during his speech at the Davos World Economic Forum, calling on businesses and firms to adopt core principles on human rights, labor, the environment, and anti-corruption.[6] The Compact launched in 2000, attracting roughly 1,000 signatory firms within a few years.[7]
Annan formally introduced the term “ESG” in January 2004 by inviting the CEOs of fifty-five leading financial institutions to participate in a new Global Compact initiative,[8] as outlined in Who Cares Wins.[9] Although the initiative never explicitly defined ESG, it emphasized that such considerations could enhance shareholder value by enabling companies to anticipate regulatory changes and consumer trends, access new markets, reduce costs, and strengthen brand reputation.[10] Ultimately, eighteen leading financial institutions, including major banks, insurers, and investment advisors, endorsed the initiative, representing nine countries and managing over six trillion dollars in assets.[11]
Eventually, the “Big Three” asset managers—BlackRock, Vanguard, and State Street—adopted ESG strategies and offered ESG investment products.[12] In 2017, BlackRock’s CEO, Larry Fink, noted that ESG factors offer “essential insights into management effectiveness and thus a company’s long-term prospects,”[13] and by 2021, he observed that companies with strong ESG profiles were outperforming their peers.[14] By 2024, trillions of dollars had flowed into ESG-labeled investments,[15] enhancing returns, increasing stakeholder engagement, protecting company reputations, and mitigating risks.[16]
However, ESG quickly evolved into a term of ideological and political debate, caught between competing notions of “conscious” and “woke” capitalism.[17] Critics argued that ESG greenwashes and politicizes corporate activity through unrealistic expectations, and dismissed the term as “virtue signaling” marketing that misleads investors and weakens corporate accountability.[18] “Red state” politicians and officials publicly opposed ESG measures, and by 2023, lawmakers in 37 states had introduced over a hundred pieces of “anti-ESG” legislation.[19] Former Vice President Mike Pence even labeled ESG as “a pernicious strategy” and an “inherently political” tool that “allows the left to accomplish what it could never hope to achieve at the ballot box or through competition in the free market,” imploring the next Republican president to end its use nationwide.[20]
Pence’s vision materialized when President Donald Trump, who called ESG investing a “way to attack American business,”[21] took office in 2025. On his inauguration day, January 20, 2025, Trump targeted ESG-related initiatives with Executive Orders 14148, 14151, and 14162.[22] Subsequent orders and Trump’s withdrawal from the Paris Climate Agreement soon prompted major global banks—including Goldman Sachs, JPMorgan, HSBC, and Barclays—to leave the UN’s Net-Zero Banking Alliance, and led top lenders to scale back or abandon their ESG policies.[23]
Despite these political setbacks, ESG remains embedded in corporate governance and business strategy.[24] As of August 2025, nearly 85% of expert investors surveyed by Bloomberg Intelligence expect ESG-managed assets to grow over the next two years, citing their value for informed investment decisions and risk management.[25] These experts also predict that investors will soon integrate AI into their ESG strategies,[26] as AI-driven analytics and reporting tools are rapidly enhancing corporate accountability and transparency.[27] Meanwhile, the United States is emerging as a political outlier, as other major economic powers, such as the European Union and several Middle Eastern nations, are advancing new ESG regulations, ensuring it remains a global priority.[28] Thus, while politics may pose temporary roadblocks, ESG will continue to evolve and strengthen its role in modern businesses.
[1] Greenscope, What is ESG? Understanding the 3 Pillars and How to Measure Its Performance, Greenscope (Oct. 2025), https://www.greenscope.io/en/esg.
[2] Anna Francesca Macesar, A Brief History of ESG, The Sustainable Agency (Apr. 26, 2025), https://thesustainableagency.com/blog/the-history-of-esg/#Present.
[3] Id.
[4] Id.
[5] Press Release, U.N. Secretary-General, Cooperation Between United Nations and Business, U.N. Press Release SG/2043 (Feb. 9, 1998).
[6] Press Release, U.N. Secretary-General, Secretary-General Proposes Global Compact on Human Rights, Labour, Environment, in Address to the World Economic Forum in Davos (Feb. 1, 1999), https://www.un.org/press/en/1999/19990201.sgsm6881.html.
[7] Elizabeth Pollman, The Making and Meaning of ESG, 14 Harv. Bus. L. Rev. 403, 412 (2024), https://scholarship.law.upenn.edu/faculty_articles/453.
[8] Id. at 413.
[9] The Global Compact, Who Cares Wins: Connecting Financial Markets to a Changing World vii (2004), https://www.unepfi.org/fileadmin/events/2004/stocks/who_cares_wins_global_compact_2004.pdf.
[10] Pollman, The Making and Meaning of ESG, at 414, 425.
[11] Id. at 413–14.
[12] Id. at 423.
[13] Larry Fink, Larry Fink’s 2017 Letter to CEOs, BlackRock (Jan. 2017), https://www.blackrock.com/corporate/investor-relations/2017-larry-fink-ceo-letter.
[14] Larry Fink, Larry Fink’s 2021 Letter to CEOs, BlackRock (Jan. 2021), https://www.blackrock.com/corporate/investor-relations/2021-larry-fink-ceo-letter.
[15] Pollman, The Making and Meaning of ESG, at 405.
[16] Id. at 426–27.
[17] Id. at 407.
[18] Id. at 405, 408, 430.
[19] Id. at 432–33.
[20] Mike Pence, Republicans Can Stop ESG Political Bias, Wall St. J. (May 26, 2022, 12:50 PM), https://www.wsj.com/articles/only-republicans-can-stop-the-esg-madness-woke-musk-consumer-demand-free-speech-corporate-america-11653574189.
[21] What Does Trump’s Anti‑ESG Campaign Mean for Sustainable Investment?, Cazenove Capital (Apr. 2025), https://www.cazenovecapital.com/en-gb/uk/wealth-management/insights/what-does-trump-s-anti-esg-campaign-mean-for-sustainable-investment/.
[22] Initial Recissions of Harmful Executive Orders and Actions, Exec. Order No. 14148, Jan. 20, 2025, 90 Fed. Reg. 8237 (Jan. 28, 2025), https://public-inspection.federalregister.gov/2025-01901.pdf; Ending Radical and Wasteful Government DEI Programs and Preferencing, Exec. Order No. 14151, Jan. 20, 2025, 90 Fed. Reg. 8339 (Jan. 29, 2025), https://www.whitehouse.gov/presidential-actions/2025/01/ending-radical-and-wasteful-government-dei-programs-and-preferencing/; Putting America First in International Environmental Agreements, Exec. Order No. 14162, Jan. 20, 2025, 90 Fed. Reg. 8455 (Jan. 30, 2025), https://www.whitehouse.gov/presidential-actions/2025/01/putting-america-first-in-international-environmental-agreements/.
[23] Why the World’s Biggest Banks Are Ditching Net Zero Goals, City A.M. (Aug. 21, 2025, 12:00 PM CDT), https://www.oilprice.com/Energy/Energy-General/Why-the-Worlds-Biggest-Banks-Are-Ditching-Net-Zero-Goals.html.
[24] Dan Byrne, Is There Value in ESG in 2026?, The Corporate Governance Institute (Oct. 8, 2025), https://www.thecorporategovernanceinstitute.com/insights/thought-leadership/is-there-value-in-esg-in‑2026/?srsltid=AfmBOori6NjZmDKpXextdJuxTcnDX1CHWHkifZSv3a2C77xnuRwmA99p.
[25] Eric Kane & Melanie Rua, BI Survey: Investors See AUM Growth for ESG, Climate, Bloomberg Intelligence (Aug. 25, 2025), https://www.bloomberg.com/professional/insights/sustainable-finance/bi-survey-investors-see-aum-growth-for-esg-climate/.
[26] BI Survey: Investors See AUM Growth for ESG, Climate, Bloomberg Intelligence (Aug. 21, 2025), https://www.bloomberg.com/professional/insights/sustainable-finance/bi-survey-investors-see-aum-growth-for-esg-climate/#:~:text=Investors%20see%20AI%20risk%20and,focus%20for%20ESG%20in%202025.
[27] Bernard Marr, 5 ESG Trends That Will Shape Business in 2026, Forbes (Oct. 17, 2025), https://www.forbes.com/sites/bernardmarr/2025/10/17/5-esg-trends-that-will-shape-business-in-2026/.
[28] Byrne, Is There Value in ESG in 2026?, supra note 23.
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