Why ESG Has Shifted From Narrative to Institutional Discipline.

This article is drawn from Integrum ESG’s “ESG Landscape 2026: Key Forces Shaping Risk” thought leadership released in January 2026.

Headlines Declared ESG Dead. Markets Said Otherwise.

In early 2025, headlines declaring the “death of ESG” multiplied, particularly in the United States.

Political rhetoric, amplified by a renewed Trump administration and a broader backlash against sustainability initiatives, framed ESG investing as a fading trend rather than a lasting discipline. By mid-year, some US firms pointed to regulatory uncertainty and political opposition as evidence of retreat.

Behind those headlines, however, the reality was more nuanced. Public debate intensified, but institutional practice continued to embed ESG into risk management, stewardship and portfolio construction. What changed was not the existence of ESG, but the standard of evidence required to support it.

This is why the “death of ESG” narrative matters. It can distract firms from the more important shift that is underway. ESG is moving from branding to implementation, from broad statements to defensible decisions.

That shift is visible in how mandates are won and lost, how stewardship expectations are enforced and how regulators are responding to greenwashing risk.

The Narrative Versus the Reality

Industry data consistently contradicted the narrative of decline.

The 2025 Morgan Stanley Sustainable Signals report showed that 86 percent of asset owners and 79 percent of asset managers expected to increase allocations to sustainable investments over the following two years.

What played out in practice supports the same conclusion. Asset owners continued to act on ESG integration, not simply talk about it. In some cases, managers were rewarded for consistency, with mandate decisions reflecting the value placed on credible implementation, as seen in Man Group winning a 13 billion mandate as a consistent ESG strategy paid off.

Equally, managers perceived to be falling short faced tangible consequences. Several reallocations and mandate reviews reflected heightened expectations around ESG integration and decarbonisation delivery, including cases such as an asset manager losing a 28 billion mandate due to lack of ESG and a manager who lost their mandate over weak ESG integration and decarbonisation efforts.

These outcomes point to a core reality for asset managers. ESG remains embedded in how asset owners assess risk management quality, stewardship credibility and long-term alignment. It is less about values signalling and more about investment discipline, governance and accountability.

A Polarised but Maturing ESG Landscape

What emerged in 2025 was a more polarised ESG ecosystem.

Political and media narratives in some markets suggested retreat, while institutional practices and capital allocation pointed to continued integration. This divergence was most visible in the United States, where political resistance coexisted with sustained demand from asset owners and beneficiaries.

At the same time, stewardship expectations became more explicit and harder to avoid. Asset owners continued to raise the bar on climate engagement, voting alignment and escalation frameworks, reflected in asset owners doubling down on climate stewardship expectations.

In parallel, asset owner actions reinforced that ESG remains a live factor in mandate oversight and retention. Reallocations did not always reflect ideology. They often reflected perceived gaps in transparency, alignment or stewardship delivery, including high-profile actions such as a pension fund pulling 14 billion from BlackRock.

The public narrative may be noisy, but the underlying institutional trend is clearer. ESG is not disappearing. It is being stress tested and operationalised under tighter scrutiny.

From Ratings to Decision-Ready Data

Another defining shift has been growing scrutiny of ESG ratings themselves.

Firms increasingly question how scores are constructed, what assumptions underpin them and whether they reflect investable reality. That scepticism has not reduced demand for ESG insight. Instead, it has accelerated a pivot away from opaque ratings toward raw, auditable and decision-ready data.

Exclusions data, emissions metrics, climate transition indicators and nature-related disclosures are becoming core inputs rather than optional overlays. The emphasis is moving toward traceability, source transparency and the ability to apply firm-specific materiality frameworks across strategies.

This shift is also reflected in the regulatory environment, where scrutiny of claims is rising and the tolerance for vague sustainability statements is falling.

Greenwashing Scrutiny Is a Signal, Not a Sideshow

If ESG were truly dying, regulators would not be escalating enforcement and legal action around misleading sustainability claims. Yet 2025 showed the opposite.

Regulators across jurisdictions continued to take a harder line on misleading conduct and unsubstantiated claims. The trend is visible in actions such as the Australian regulator suing an IAG subsidiary over misleading customers and a Canadian regulator accusing an asset manager of greenwashing.

For asset managers, this matters because scrutiny increasingly focuses on whether sustainability claims are consistent with portfolio holdings, investment process design and stewardship activity. The market is moving away from broad positioning and toward evidence.

That is not the death of ESG. It is the cost of credibility rising.

The Next Phase of ESG in 2026

Looking into 2026, the next phase of ESG is defined less by slogans and more by implementation.

Regulatory presence is rising across jurisdictions, reinforcing expectations around standardised and transparent reporting. Supervisory scrutiny is intensifying where sustainability claims intersect with product design, reporting and marketing.

Mandates are also evolving. ESG metrics are increasingly standard inclusions in investment guidelines, supported by stakeholder expectations around risk oversight and transparency.

Finally, the demand for actionable data is accelerating. Asset managers are prioritising traceable inputs that can be defended under client challenge, assurance processes and regulatory review.

For many firms, the challenge is not deciding whether ESG matters. It is building operating models, datasets and governance that meet the new standard of scrutiny.

Even where politics remains divisive, legal and fiduciary signals continue to develop. For example, climate-related legal decisions and their implications for risk and accountability are gaining attention, including the ICJ climate ruling and why it matters.

In the US, perception risk and client expectations also remain complex. Understanding beneficiary sentiment matters, especially in public markets and pensions, reflected in what US pensioners really think about ESG.

What Investors Should Do in 2026

Asset managers navigating the next phase of ESG integration should:

Focus on substance over narrative by strengthening ESG integration across mandates, stewardship and investment risk management

Replace reliance on opaque ratings with traceable and decision-useful datasets that support firm-specific materiality frameworks and defensible disclosures

Raise internal standards for ESG data governance, documentation and controls so sustainability claims remain consistent across portfolios, reporting and client communications