Eighty-five percent of the world's largest companies maintained or expanded their sustainability programs over the past year, even as most reduced what they say about it publicly (Hawkins & Cooper, 2025). That's the backlash captured in a single data point: a movement that changed the conversation without changing the calculus.

The Pressure Is Genuine

The political environment facing corporate sustainability has deteriorated sharply. Since 2021, 482 anti-ESG bills have been introduced across 42 US states (Pleiades Strategy, 2025). Twenty-one states have signed 52 of them into law, and 106 new bills appeared in 32 states during 2025 alone (Pleiades Strategy, 2025). The federal administration has rolled back disclosure requirements and positioned sustainability-integrated investing as ideologically suspect. In Europe, the CSRD's scope was reduced by roughly 90%. Major asset managers have exited collective sustainability coalitions. Mentions of ESG on earnings calls have dropped to their lowest level since 2020 (Tucker et al., 2024).

These trends are landing inside companies. A Conference Board survey of 125 sustainability executives found that 90% expect anti-ESG sentiment to persist or intensify over the next two years, up from 61% in 2023 (Conference Board, 2025). Eighty percent are adjusting their strategies, and 78% now identify federal policymakers as the primary source of opposition, a figure that has nearly doubled in two years (Conference Board, 2025).

Every sustainability leader reading this is navigating some version of this pressure. Whether it has changed the financial case for sustainability is a separate question, and every credible data source gives the same answer: it hasn't.

The Economics Are Structural

The financial case for sustainability rests on materiality: the specific environmental, social, and governance factors that are financially significant to a company's sector and operations. Harvard Business School research established that companies performing well on material sustainability issues significantly outperform their peers, while performance on immaterial issues makes no financial difference (Khan, Serafeim & Yoon, 2016). The political backlash frames ESG as a broad ideology. In practice, the financial evidence supports something far more specific: disciplined management of the sustainability factors that affect your cost of capital, risk profile, talent retention, regulatory exposure, and stakeholder relationships. Which specific factors those are varies by sector, and the companies that navigate this well have identified what investors and rating agencies in their industry actually weight.

That evidence base is one of the most extensively studied in corporate finance. Across 2,200 empirical studies spanning five decades, roughly 90% show a non-negative relationship between ESG performance and financial results, with the large majority positive (Friede, Busch & Bassen, 2015). MSCI's nine-year study of more than 4,000 issuers found a 110 basis point spread in cost of capital between the highest and lowest ESG-rated companies (MSCI, 2024). These ratings assess environmental, social, and governance factors together: resource efficiency, labour practices, board oversight, supply chain management, transparency. Deutsche Bank's meta-study confirmed that 100% of the academic research it examined agreed on one finding: high-ESG companies have a lower cost of capital, for both debt and equity (Deutsche Bank, 2012).

These findings have remained stable through the entire backlash period. Morgan Stanley's data shows that a hypothetical $100 invested in sustainable funds in December 2018 grew to $154 by mid-2025, compared to $145 in traditional funds (Morgan Stanley, 2025). In the first half of 2025, sustainable funds posted median returns of 12.5% versus 9.2%, the strongest outperformance since tracking began in 2019 (Morgan Stanley, 2025).

The institutions that allocate capital have continued to deepen their integration of sustainability factors throughout the backlash. Morningstar's 2024 Voice of the Asset Owner survey, covering 500 institutions representing $18 trillion in AUM, found that 67% consider ESG more material to their investment decisions than five years ago (Morningstar, 2024). Only 13% said the opposite. The share who view ESG as integral to fiduciary duty rose from 53% to 61% between 2024 and 2025 (Morningstar, 2024/2025). When shareholders vote on anti-ESG proposals, the results are equally definitive: 82 proposals reached shareholder votes in 2024 and received an average of 1.9% support (Harvard Law School Forum, 2024). Ninety-eight percent of shares cast opposed them.

What Retreat Costs

The most precise illustration of what happens when political logic overrides financial logic comes from Texas. When the state barred municipalities from working with banks that maintained ESG-related investment policies, five major underwriters (JPMorgan Chase, Goldman Sachs, Citigroup, Bank of America, Fidelity) left the market. Wharton and Federal Reserve Bank of Chicago researchers calculated the cost: $300 to $500 million in additional interest on $31.8 billion in bonds, within eight months (Garrett & Ivanov, 2023). Borrowing costs rose roughly 40 basis points for affected municipalities (Garrett & Ivanov, 2023).

Restricting the pool of financial counterparties for ideological reasons reduced competition and raised the price of capital. Texas taxpayers are paying hundreds of millions more for a policy that changed no underlying economic reality.

Companies pulling back on sustainability substance face a version of this dynamic at the enterprise level. The institutions managing $139 trillion in assets evaluate sustainability performance across environmental, social, and governance dimensions as part of how they price risk and make allocation decisions (UNPRI, 2025). Reducing investment in material sustainability factors, weakening governance structures, or scaling back the transparency these investors rely on creates a widening gap between what they look for and what your company can show. That gap shows up in your cost of capital, your index inclusion, and the depth of institutional demand for your equity and debt.

BCG's 2025 research quantifies what companies staying the course are gaining: 70% are maintaining or increasing their overall sustainability investment, with plans to increase sustainability-related capital expenditure by an additional 16% over the next five years (BCG, 2025). PwC's 2024 Global CEO Survey found that 45% of CEOs believe their company won't survive a decade without reinventing for sustainability-related disruptions, and one-third report that sustainability investments have already produced revenue growth (PwC, 2024). These executives are investing based on the financial data, not the political cycle.

What the Best Companies Have Figured Out

The Conference Board tracked how S&P 100 companies label their sustainability reports. Use of "ESG" in report titles dropped from 40% in 2023 to 6% in 2025 (Conference Board, 2025). Over the same period, 87% of S&P 500 firms disclosed sustainability-related targets, and the share of Russell 3000 companies identifying sustainability as a financial risk nearly doubled from 30% to 56% (Conference Board, 2025). Companies are reporting more substance under less politically charged terms.

Harvard Business Review's study of 75 of the world's largest companies, tracked from April 2024 to May 2025, reveals the pattern beneath the headlines (Hawkins & Cooper, 2025). Only 13% have genuinely retreated from sustainability programs. Thirty-two percent are actively accelerating. Over 50% are doing more while saying less publicly.

This approach makes sense. PwC's 2025 Global Sustainability Reporting Survey found that 66% of companies have increased resources for sustainability reporting, while over 50% report growing stakeholder pressure for sustainability data (PwC, 2025). Only 7% report declining pressure (PwC, 2025). The people making capital allocation decisions about your company haven't stopped asking for sustainability performance data because a political environment shifted. What they ask for has become more specific: performance on the sustainability factors that are material in your sector, connected to financial outcomes they can verify. Seventy-seven percent of S&P companies continue to tie executive compensation to sustainability metrics, because the financial relationships those metrics reflect are unchanged (Tucker et al., 2024).

The companies navigating this well have treated the communication challenge and the performance challenge as separate problems. They've adjusted language for political prudence while ensuring their sustainability communications still pass the tests that matter: clear, substantive, grounded in data, and aligned to what their sector's investors evaluate.

The Question for Your Company

Political environments run on election cycles. The cost of capital advantage from strong sustainability performance, the allocation criteria of the world's largest institutional investors, and the operational efficiencies from managing material sustainability factors run on fundamentally longer timescales. These dynamics compound regardless of which party holds power.

Adjusting your sustainability language for the current environment is pragmatic risk management. The decision to pull back on the substance of your sustainability performance carries fundamentally different consequences, because the institutions pricing your company haven't changed what they look for.

Your company will outlast this political cycle. The question is whether the decisions you're making right now will compound in your favour, or against it, when the noise passes.

References

• Garrett, D.G. & Ivanov, I.T. (2023). Gas, Guns, and Governments: Financial Costs of Anti-ESG Policies. Federal Reserve Bank of Chicago, Working Paper No. 2023-07. ssrn.com
• Pleiades Strategy (2025). Anti-ESG State Legislation Tracker. pleiadesstrategy.com
• Harvard Law School Forum on Corporate Governance (2024). Anti-ESG Proposals Surged in 2024 But Earned Less Support. corpgov.law.harvard.edu
• Tucker, A., Brakman Reiser, D. & Xia, Y. (2024). Is 2024 Past Peak ESG? Harvard Law School Forum on Corporate Governance. corpgov.law.harvard.edu
• Morningstar (2024). Voice of the Asset Owner Survey 2024. morningstar.com
• Morgan Stanley Institute for Sustainable Investing (2025). Sustainable Investing Funds Beating Traditional Funds in 2025. morganstanley.com
• Morgan Stanley Institute for Sustainable Investing (2024). Sustainable Investment Funds Performance: H2 2024. morganstanley.com
• BCG (2025). Four Out of Five Companies Report Financial Gains from Climate Action. bcg.com
• Hawkins, N. & Cooper, K. (2025). Are Companies Actually Scaling Back Their Climate Commitments? Harvard Business Review. hbr.org
• Conference Board (2025). Sustainability Under Scrutiny. conference-board.org
• Conference Board (2025). Climate Disclosure and Sustainability Terminology. conference-board.org
• PwC (2025). Global Sustainability Reporting Survey. pwc.com
• PwC (2024). Global CEO Survey. pwc.com
• Friede, G., Busch, T. & Bassen, A. (2015). ESG and Financial Performance: Aggregated Evidence from More Than 2,000 Empirical Studies. Journal of Sustainable Finance & Investment, 5(4). tandfonline.com
• Khan, M., Serafeim, G. & Yoon, A. (2016). Corporate Sustainability: First Evidence on Materiality. The Accounting Review, 91(6). ssrn.com
• MSCI (2024). ESG Ratings and Cost of Capital. msci.com
• Fulton, M., Kahn, B. & Sharples, C. (2012). Sustainable Investing: Establishing Long-Term Value and Performance. Deutsche Bank Climate Change Advisors. ssrn.com
• UN Principles for Responsible Investment (2025). Reporting and Pathways 2025. unpri.org