As an impact investing team operating in listed equities, we decided to cut through the noise and examine the facts behind the prevailing negative narratives. Here is a list of the myths and exaggerations that we have decided to bust.
1. Outflows in sustainability funds
It is true: the first quarter of 2025 saw a record USD 8.6 billion in net outflows from ESG funds globally, according to Morningstar, the steepest since tracking began. Europe, long a stronghold for sustainability-focused investing, recorded its first net withdrawals since at least 2018. These figures cannot be ignored — but they also don’t tell the whole story. While generalist ESG funds have suffered, thematic and targeted impact strategies — particularly those focused on climate solutions, biodiversity, and resource efficiency — are showing resilience. The outflows reflect growing scepticism of vague ESG labelling, not the demise of environmental and social value creation as a driver of long-term financial performance. For disciplined investors, this moment is less an existential crisis and more a necessary course correction toward substance.
It is also important to put things in perspective: the much-commented European outflow USD 1.2 billion represents a small fraction of the USD 2,669 billion invested in sustainable funds according to the same source.
2. Climate commitments are out
There has been a visible retreat from headline climate commitments. The US’s withdrawal from the Paris Agreement made waves, and several major financial institutions, including JPMorgan Chase and Morgan Stanley, exited the Net-Zero Banking Alliance in late 2024, citing legal risks and shifting political winds. But these exits are more symbolic than structural. Most banks, including those who left the alliance, have retained near-term decarbonisation targets and continue to finance renewable energy and transition technologies. Similarly, companies have not turned their backs on climate disclosure or action: CDP reporting is up year-on-year, with over 24,836 companies submitting environmental data in 2024 — compared with 23,293 in 2023 and 5,624 back in 2015. While the Science-Based Targets initiative (SBTi) has tightened its criteria, leading to the delisting of over 200 firms, over 6,000 companies still maintain validated science-based targets. The architecture of climate action remains operational, if less loudly celebrated.
3. Corporations don’t care about nature
The criticism that companies are ignoring nature and biodiversity concerns does not reflect reality. Participation in the 2024 Biodiversity COP in Cali exceeded expectations. There are now 450 companies who have committed to disclose their nature-related issues to investors using TNFD recommendations. This momentum is mirrored in investor coalitions such as Nature Action 100, which gained new institutional signatories in the past year and now counts more than 220 members. Importantly, companies are beginning to embed nature risk into core strategic assessments, not just sustainability reports. For listed equity investors, this shift offers a clearer line of sight into material biodiversity risks and dependencies — making it not just good for the planet, but good for investment due diligence.
4. The energy transition is dead
The narrative of the energy transition being ‘dead’ is contradicted by data. Progress continues to be made on renewable energy. The share of energy produced by renewables at global level continued to increase in 2024, as it has done since the early 2000s. Efficiency is still stuck at the current 1% annual gains, far from what they should be. However, the electrification of the world economy continues, as shown by the rise of electric vehicles, which should push efficiency up over time. Methane emissions are hard to measure, but it has been a focal point of the recent COP discussions, and there is a wide coalition to tackle it. All in all, the trend of falling emissions per capita in advanced economies is well established. The first Trump presidency did not change that in the US, and we think it will be the same for the second one.
5. Diversity is so 2020
What may be true is that the 'DEI' acronym may have become somewhat inflammatory. Diversity, however, continues to be a major driver of corporate innovation. On such a connected planet, there is no such thing as a 'typical' customer – the more diverse a company's decision-makers, the more likely they are to make product decisions that ensure long-term success. The majority of employees, investors and consumers applaud a fair representation of views and experiences. What may be more challenging is the sometimes rigid application of this philosophy by corporates. This may need to evolve, but the underlying principle, in our view, will continue to make progress, as the penalty for not doing so ultimately lies in financial performance.
6. Sustainability is optional
In the current environment, where political pressure seeks to decouple sustainability from fiduciary duty, it is essential to reassert the economic rationale behind impact investing. Investing in climate mitigation and adaptation is not a moral luxury — it is a response to risk and opportunity. The cost of inaction on climate is rising: the global economy lost an estimated USD 380 billion to climate-related disasters in 2024. In Pakistan, the 2022 floods have been the worst in history and cost the equivalent of 10% of gross domestic product. In short, sustainability is not optional for countries and companies that want to thrive through uncertainty, and it is not optional for investors who seek sustainable returns.
Conclusion: the work that matters now
It is easy to be distracted by the noise. We are operating in a landscape where language has been politicised, sentiment has turned, and the spotlight on ESG has grown harsher. Some of the backlash is legitimate. We had collectively become too focused on acronyms and certifications. But if you follow the facts — not just the headlines — you will find that the foundations of sustainable investing remain solid. The material risks and opportunities tied to climate, nature, and social equity are not going away.
Our job, as an impact investing team, is not to defend a label: it is to find substance behind the optics, to back companies that are genuinely aligning financial and sustainability outcomes, and to help clients navigate a path to resilient value.
The backlash may have stripped the gloss off ESG, but for serious investors, this moment is less an end than a beginning. It will not be the first time a bust is followed by a resilient long-term trend: it happened 20 years ago in the aftermath of the dot-com boom.
This article is an excerpt from our Impact Report 2024.
The views and opinions expressed by fund managers (internal or external) may differ from the house view. They are shared for informational purposes and do not constitute investment advice or a recommendation.
