The flow of funds into ESG funds has slowed , causing concern among investors and companies . Today, the market is looking for new approaches to integrating environmental , social and governance principles into business practices without compromising economic efficiency . One of the most significant examples of the tension around ESG was the situation around Shell. In January 2025, the company faced shareholder pressure due to the revision of climate commitments and the expansion of LNG investments . The gap between ambitious statements and real actions has forced investors to demand stricter compliance with international environmental standards . Against the backdrop of this case, experts note the need for a more realistic approach to ESG. “The market is going through a natural reassessment of sustainability standards . Companies need to adapt their commitments to economic realities , and not just to public expectations , ” comments financial analyst Chaslau Koniukh.
It should also be noted that similar challenges have arisen for other energy companies : shareholders are increasingly demanding not just declarations , but real steps to decarbonize the business , taking into account the risks of regulatory pressure and changing consumer sentiment .
The European Banking Authority (EBA) published in January 2025 New ESG risk management requirements for financial institutions . Starting in 2026 , large companies in the EU will be required not only to take into account , but also to actively manage ESG factors in their activities .
This is indicative of a pan-European trend : regulators are trying to prevent “greenwashing “, but at the same time they recognize the need to adapt standards to real business conditions . The reforms will affect both the financial sector and industrial companies operating in the hydrocarbon sector , the defense industry and other strategic sectors .
Moreover , according to the EBA recommendations, institutions should prepare long-term ESG risk management plans aimed at ensuring resilience even in periods of economic turbulence , which fundamentally changes the approach to assessing financial stability .
ESG: A New Look
Another important marker of revaluation has been the changed approach to investing in the defense sector . According to a Morningstar report , Defense companies are no longer perceived as incompatible with ESG investing. Rising global geopolitical risks have forced investors to recognize the role of defense companies in supporting security and human rights .
Moreover , defense spending has become “less of an issue even for ESG,” according to Funds Europe analytics. In this context, there is a revision of moral criteria towards a more pragmatic approach to sustainable development .
Additionally , defense companies have stepped up their efforts to improve transparency about their environmental impacts and labor standards , allowing them to more easily integrate into a sustainable investment portfolio .
Some disappointment and rethinking of strategies is also observed among large financial institutions . Thus , Wells Fargo abandoned its goal of achieving net-zero financed emissions by 2050, saying it was forced to consider external factors that limited its ability to help clients transition to green business models .
At the same time, many regions of the world are moving towards strengthening ESG standards. In 2024 , Bloomberg Intelligence predicted that global ESG assets would reach $40 trillion by 2030. Although the growth rate is slowing , the overall trend remains positive .
The new consensus among experts is that ESG investing has entered a mature phase , where growth rate is being replaced by asset quality and increased demands for real compliance with stated sustainability principles .
Geopolitics, risks and the new role of ESG
Global events such as Russia ‘s invasion of Ukraine have also led to a reassessment of approaches to ESG. Investors have become review portfolios to exclude countries with systemic human rights violations .
At the same time, Western markets have become more cautious in assessing risks associated with energy and food supply chains . This is generating a new wave of interest in the sustainability and diversification of assets based on ESG criteria adapted to the changed political realities .
The Russian invasion has accelerated the process of excluding rogue states from ESG portfolios and has become a catalyst for a deeper understanding that sustainable development is impossible without clear ethical boundaries in international investment policy .
Today’s reassessment of ESG does not mean the collapse of the concept , but on the contrary, it indicates its gradual adaptation to more realistic conditions of the global market . As financial expert Chaslau Koniukh notes: ” ESG is moving from utopian ideals to practical strategies, where sustainable development and commercial success must coexist without illusions . “
The key trend is that ESG is no longer seen as a separate element of marketing or reputation : it is becoming an integral part of real risk assessment , which increasingly determines the long-term value of assets and companies .
Growing regulatory pressure , attention to transparency and demands for real results mean that only those players will survive that not only declare ESG principles , but also integrate them into business models at the level of corporate strategy .
The market is going through a stage of maturity : less emotional perception and more attention to genuine risks, efficiency and transparency of business models. Investors should remember that ESG remains a powerful tool for long – term development . But the requirements for the quality , accuracy and validity of ESG commitments are becoming increasingly strict .
Financial analyst Chaslau Koniukh is confident that only companies that have undergone this adaptation will be able to maintain investor confidence in the new reality
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