ESG has become central to the conversation on sustainable finance. But is it driving real-world change or distracting from the rules and investments that matter most?
ESG (Environmental, Social and Governance) investing was meant to help finance drive positive change. But is it delivering real-world impact, or has it become a reassuring story that allows delay while emissions and nature loss continue?
That question sat at the heart of Is ESG Greenwash?, a Global Returns Project event featuring Sasja Beslik, Tariq Fancy and Harriet Lamb, with a keynote from Professor Sir Dieter Helm. The discussion cut through marketing narratives to examine what ESG can and cannot realistically achieve.
When good intentions meet hard limits
The panel agreed that finance must play a central role in tackling climate change and biodiversity loss. These are global challenges that require capital to move at scale, including into developing economies where future emissions growth will be concentrated.
But moving from ESG as an idea to ESG as an outcome is a far bigger step than many admit. Helm warned that poorly designed ESG frameworks risk becoming a substitute for action rather than a driver of it. Offsets without rigorous standards can legitimise continued pollution. Voluntary disclosures can soothe stakeholders while delaying the regulatory changes that actually matter.
Several speakers challenged the way ESG has been sold to the public. In liquid public markets, many ESG products offer values alignment rather than measurable, additional impact. Buying shares in “better” companies rarely changes the underlying systems driving emissions if incentives, governance and rules remain untouched.
Tariq Fancy was blunt: climate change is a classic market failure. Expecting voluntary action to fix it, without carbon pricing, enforceable standards and clear regulation, is wishful thinking. Worse still, overselling ESG as the solution risks undermining the political will for the policies we know are essential.
What needs to change?
The discussion did not argue for abandoning ESG, but for using it more honestly. That means moving beyond box-ticking and relative scores toward absolute outcomes: real emissions reductions, credible transition plans and business models aligned with a 1.5°C world.
It also means recognising where markets fall short. Many of the most effective climate and nature solutions, ranging from community-led energy projects to legal accountability and ecosystem protection, are not easily investable and remain chronically underfunded. Civil society organisations, public institutions and non-profits play an essential role in turning ambition into delivery.
At the Global Returns Project, we see ESG as a useful tool but not a cure-all. On its own, ESG cannot correct market failures that reward pollution, externalise harm and privilege short-term returns. Used well, however, it can help reduce damage, improve transparency and shift norms inside financial institutions. The mistake has been to ask it to do more than it was ever designed for.
Addressing climate and nature breakdown at the necessary speed and scale requires a both/and approach. Markets need firm boundaries, clear regulation, credible standards and prices that reflect real-world costs.
At the same time, many of the most critical solutions sit outside conventional investment: legal accountability, ecosystem protection, community delivery and policy reform. These are essential to system change, yet chronically underfunded.
The real test of ESG is therefore not how sophisticated the framework looks, but whether it accelerates outcomes that would not otherwise happen. Does it drive absolute emissions reductions? Does it shift capital, power and incentives? Does it shorten the distance between commitments and delivery?
If ESG helps answer those questions honestly, it can play a meaningful role in the transition. If it obscures them, it becomes the respectable face of business as usual. The path forward is clear: fix the rules that govern markets, fund the work markets overlook, and judge success not by labels or scores, but by the health of the systems we depend on.