High‑profile departures and provocative headlines have convinced some observers that ESG is on the ropes. But step beyond the noise and a different picture emerges. Investors are still pouring billions into climate‑focused funds, regulators are working to streamline sustainability reporting, asset managers are refining, not ditching their strategies, and a steady stream of new products keeps the market vibrant. This piece looks at why the much‑touted “backlash” is more smoke than fire – and where the real momentum lies.

 

 

Stories of the ESG retreat make headlines but they only show one side of the story. Barclays and UBS left the Net‑Zero Banking Alliance after a string of departures in the last couple of years. Scientific Beta asserted that ESG scores don’t improve investment decisions. Half of pension funds admit they seldom read impact reports. 

 

Headlines also suggest that defence investments are coming back into fashion, despite being featured on most exclusion lists in the past decade: JP Morgan and ING have declared support for a new European defence bank, and Columbia Threadneedle widened an Article 8 fund to include conventional weapons. These cases fuel the talk of a backlash – but it is not as far-reaching as headlines might suggest.

 

 

A closer look at the facts and data tells a different story. According to Barnett Waddingham, UK defined contribution (DC) schemes increased their allocations to climate‑focused funds by 34% in the default growth stage since 2021. Pensions for Purpose found that 40% of defined benefit (DB) and DC pension schemes now have dedicated climate allocations while 60% see climate risk as a fiduciary duty. Demand for UK green gilts is undimmed; auctions have raised £7.7bn and remain oversubscribed. 

 

Additionally, private market investors estimate sustainability can lift revenues by around 6%, and studies find asset owners are becoming more sophisticated – some are even shifting from US to European managers to avoid politicised headwinds. UK insurers faced climate‑activist protests, and a study said many sustainability‑linked bonuses are too easy to hit. Mars (yes, the maker of Mars bars) launched a $250m climate‑solutions fund.

 

Regulators are also pushing ahead with changes to address the regulatory burden. The Pensions Regulator is designing a voluntary transition plan template and telling trustees to treat climate and nature as core financial risks. The FCA aims to streamline sustainability reporting, and its recent review noted better integration of climate risks. 

 

Additionally, Aviva says biodiversity considerations are rising despite anti‑climate rhetoric. Investment flows support this: NEST committed $750m to BTG Pactual’s timberland fund, Phoenix Group pledged €120m to a Luxembourg sustainable‑energy firm, and the Ealing Pension Fund is weighing a £17m allocation to Gresham House’s British sustainable infrastructure fund.

 

 

Most asset managers are adapting, not quitting. M&G’s $3bn emerging‑market debt fund now screens out companies on the Norges Bank exclusion list, and its climate strategy now focuses on aligning assets with net‑zero pathways. Europe’s regulator ESMA (European Securities and Markets Authority) is asking managers to justify ESG claims, and Ninety One welcomes scrutiny of “flabby” strategies because it believes weeding out weak products will strengthen the market. An Isio survey noted some managers are pulling back on concrete objectives due to reporting weaknesses, but 97% of asset managers have an established ESG policy and dedicated sustainability teams and are "raising the bar" on sustainable investing.

 

 

A stream of new funds and investment strategies underscores how far from “dead” ESG really is. Blackstone raised $5.6bn for an energy transition fund, hitting its hard cap and exceeding its predecessor’s size by one‑third. Kayne Anderson’s energy fund topped $2bn, beating its $1.5bn target and funding US energy‑transition infrastructure. Swedish manager Areim raised another €450m for sustainable data‑centre fund – doubling its sustainable data centre fund to about €900m.

 

Norway’s NBIM invested €1.4bn in offshore‑wind projects in Denmark and Germany. NextEnergy’s Solar Fund closed at £733m, beating its target by 47%. The manager plans to launch a follow‑on UK solar strategy. A fund backed by AllianzGI and EIB, which invests in emerging‑market climate projects, closed at €450m. Octopus Energy launched a $250m African clean‑energy vehicle, and renewable‑energy developer Renalfa raised €315m for Eastern European projects. And ImpactA Global raised $200m to finance infrastructure, mobility and water projects in emerging markets.

 

Border to Coast is preparing a green, social and sustainability bond fund. Schroders is developing ‘bespoke’ nature products. Nuveen raised $785m for a C‑PACE real‑estate lending strategy. Legal & General added $235m to a nature and social outcomes strategy, taking the strategy to more than $1bn. AXA’s short‑duration green bond fund earned the UK’s “Impact” label, and managers such as UBP are using AI‑derived nature metrics in company engagement.

 

 

Every ESG story has an agenda – critics dwell on high‑profile exits or soft targets, while advocates highlight new funds and policies. Our motive here is simple: cut through the noise to show where the capital is actually flowing. The evidence suggests that investors, regulators and fund providers are pushing ahead with ESG, even if a few headlines suggest otherwise. And if you’re still sceptical, we’d be happy to survey UK investors and/or their managers to give you concrete proof.