ESG isn’t dead. It’s just growing up

Why the so-called ESG backlash is a sign of maturity, not demise, and what Australian businesses should do next.

If you've been scanning headlines lately, you’d be forgiven for thinking ESG (Environmental, Social and Governance) is on the ropes. From accusations of “woke capitalism” to investor caution and murmurs of rebranding, the term has certainly taken a hit. But in reality, ESG isn’t dying. It’s evolving, and that’s a good thing.

The acronym may be losing popularity, but the principles behind it are becoming more deeply embedded in how companies manage risk, earn trust and create long-term value. For leaders willing to pivot rather than panic, this moment represents a timely opportunity to sharpen strategy, clarify purpose and strengthen resilience.

The ESG “vibe shift”: signal or smoke?

The so-called backlash has been most visible in the US, where ESG has become a political football. But Australia is not the US. The Australian Financial Review reported in June 2025 that while a “backlash against corporate ESG efforts” took hold in the US and parts of Europe following Trump’s re-election, that backlash was “held off in Australia” following Labor’s landslide victory (AFR).

Despite some companies turning down the volume, many of CIM’s own Tier 1 real estate investment trust (REIT) partners have made it clear: ESG still matters. These owners are doubling down on operational risk, climate resilience and regulatory readiness, rather than turning away from the core issues ESG frameworks help illuminate.

Globally, ESG-aligned funds saw significant withdrawals in early 2025, with US$8.6 billion in net outflows recorded in Q1 (Morningstar). But Australia and New Zealand bucked the trend, with US$300 million in net inflows during the same period; proof that regional investors still see ESG as a source of long-term value.

Importantly, ESG is being recalibrated, with less noise and more substance. As Alice Bielawska from Glass Lewis told the AFR ESG Summit:

“Whether it’s labelled ESG or something else, it doesn’t matter – because the bottom line is identifying those financially material risks and managing them properly.”

Persist, pause or pivot? It’s time to pivot

Patrick Langrell, Director of the Governance and Public Affairs Centre at the Australian Catholic University, outlined three responses Australian business leaders are taking to the ESG “vibe shift” (AFR):

• Persist: Stick with existing strategies and hope sentiment swings back
• Pause: Wait and see – dial back rhetoric while keeping commitments alive
• Pivot: Openly evolve, recalibrate strategy and bring stakeholders along

At CIM, we believe the pivot is not only the most constructive approach, it’s also the most commercially astute. It means acknowledging that ESG, like any maturing framework, benefits from refinement. It’s about getting sharper, not softer.

This strategy is also being reflected in the real estate sector. According to Knight Frank’s latest report, 83% of property investors in Australia plan to improve existing assets through retrofits, and 75% are actively seeking opportunities to acquire underperforming buildings and enhance their ESG profile (Knight Frank). The motivation is clear, says Jenine Cranston, Head of ESG at Knight Frank:

“Properties that have solid ESG credentials will attract more buyers when owners want to sell, and this buyer competition will underpin the asset’s value.”

Our own experience at CIM aligns with his sentiment, witnessing firsthand how ESG is becoming a driver of measurable performance for key industry players. Solutions like our PEAK Platform are used by major property owners to manage various types of risk and performance at the building and portfolio level, turning ESG principles into tangible operational outcomes.

A quiet maturity and why that’s powerful

Much of the backlash stems from ESG being treated as a branding or compliance exercise. That era may be ending, but what’s emerging is arguably more powerful: a quieter, embedded ESG that speaks through action rather than slogans.

It’s worth remembering that ESG was never meant to be restricted to the environment. At its core, it was designed to address long-term, material factors that influence a company’s ability to succeed. Environmental impact is one, but social issues such as diversity, equity, inclusion, and community engagement are increasingly central. These “S” issues are also where some of the strongest challenges, and opportunities, now lie.

As Gabriel Radzyminski of Sandon Capital (AFR) remarked:

“Everyone wants to change the world’s problems as long as they don’t have to pay for it themselves… As investors, we focus on profits – but that doesn’t mean we want to see the environment destroyed.”‍

Investor sentiment is evolving. A report by the Investor Group on Climate Change (IGCC) in April 2025 found that Australian institutional investors (representing $4.2 trillion in AUM) remain strongly committed to climate action “despite some current global anti-ESG sentiment.” (IGCC)

Meanwhile, the demand for credible, material ESG data is intensifying. According to EY’s recent institutional investor survey:

• 79% of Australian investors are actively assessing physical climate impacts (like extreme weather and stranded assets)
• 76% believe greenwashing is a bigger problem today than five years ago
• 96% expect companies to meet their decarbonisation targets

As Debby Blakey, CEO of leading superannuation fund HESTA (AFR), noted:

“If we look through the noise, it’s about the bar being raised. People want to see real action.”‍

Where ESG goes from here

This moment demands leadership, not lip service. For asset managers, owners and operators, the questions now are:

• Are we using ESG data to manage real risks – not just report on them?
• Are our strategies flexible enough to adapt to new stakeholder expectations?
• Are we investing in tools that make ESG actionable and performance-driven?

Regulation is now also reinforcing this shift from insight to action. As part of Australia’s new Australian Sustainability Reporting Standards (ASRS), companies will soon be required to comply with AASB S2 Climate-related Disclosures. This mandatory standard requires reporting on climate-related risks, opportunities, governance, strategy, risk management and metrics (including Scope 3 emissions from year two). These must be included in a dedicated Sustainability Report alongside financial statements.

Done right, ESG will continue its transformation from headline to heartbeat, less about virtue-signalling, more about value creation. Less about labels, more about outcomes.

In other words, it’s growing up. And it’s an ‘action over insight’ evolution that we at CIM support.

Sources

• AFR, Langrell, Patrick – Why ESG and DEI could be the next big business risk, June 2025
• AFR ESG Summit, Tattersall, Hannah – Risk matters more than ESG label, June 2025
• AFR, Durkin, Patrick & Cropp, Ryan – Is ESG dead? These CEOs say no, June 2025
• AFR, AFR Chanticleer – ESG’s social licence gone like green hype. That’s OK, June 2025

• Morningstar, Global Sustainable Fund Flows Q1 2025, May 2025
• KPMG, Australia Sustainability Reporting Survey 2024, November 2024
• IGCC, Investor Group on Climate Change – State of Net Zero Investment 2025, April 2025
• Knight Frank, ESG credentials a key consideration for commercial property investors, May 2025