The Decline of ESG: How Global Instability is Shifting Investment Priorities

As ESG's dominance is fading, focus falls on technology, energy, and local businesses

Peter Canariov
September 9, 2024
3 min read

Is the era of ESG investments coming to an end?

The centralization of the economy and capital has long driven growth, boosted business expansion, and increased productivity. This trend brought ESG (Environmental, Social, and Governance) investing into the spotlight, with major developed countries and investors striving to anticipate ESG-related risks and make sustainable, long-term investments. Leading the charge were G7 nations and influential investment firms like BlackRock and Vanguard.

The Rise and Fall of ESG Investments

Between 2010 and 2022, ESG investments experienced remarkable growth, with an ever-increasing share of capital flowing into this sector. ESG was the buzzword, topping the list of investment priorities. However, the outbreak of the war in Ukraine marked a turning point, significantly altering the global investment landscape. ESG, once the leading investment focus, has now dropped to seventh place on the priority list.

Why the Shift?

One of the key reasons for this shift is the lack of global unity and centralization. Embracing ESG has proven difficult for countries that did not benefit from previous cycles of economic development. The war in Ukraine has further polarized the world, prompting companies to prioritize energy security and technology over ESG concerns. This has sparked criticism of the ESG model, particularly from right-leaning political commentators like Tucker Carlson, who argue that its mission is misguided.

Investment Market Reorientation

As the world adjusts to new global realities, the investment market is also undergoing a transformation. BlackRock’s recent acquisition of research and analysis firm Preqin highlights this shift, suggesting a growing interest in private investments and local businesses. Major investors are increasingly favoring sustainable investments in smaller businesses rather than large-scale ESG projects.

This move reflects a broader trend away from centralization, which no longer aligns with current geopolitical and economic conditions. Investments are now flowing more towards technology, analytics, and a reorganization of portfolios to better manage emerging risks.

Investors Recalculate Amid Global Instability

The instability caused by recent global events has led investors to reevaluate their strategies. This recalibration is evident in the actions of major players like the Norwegian Fund, which has reduced its exposure to ESG investments over the past two years while increasing its stake in technology and energy companies.

A New Focus: Technology, Energy, and Sustainability

The investment landscape is at a pivotal moment, with a growing emphasis on research, analysis, and insights into technology, energy resources, and sustainable practices within small and medium-sized enterprises. As investors seek to navigate a complex and shifting global environment, the battle for strategic insight in these areas will shape the future of investment priorities.

The question now is whether ESG can adapt to this new world order or if its decline signals the beginning of a new era in global finance.