Forget ESG. Let’s Talk About Risk.

A new era of risk-adjusted sustainability is taking shape—and it might just be the wake-up call business needs.

For years, Environmental, Social, and Governance (ESG) principles were the poster child of responsible business. They shaped corporate reports, investor strategies, and sustainability teams the world over. But lately, something’s changed.

Across boardrooms, in politics, and throughout capital markets, ESG is starting to feel weaker—less relevant, even a bit outdated. In the U.S., we’ve seen a political backlash, with terms like “woke capitalism” weaponised against ESG-aligned strategies. DEI initiatives that were once fast-tracked are now being quietly dropped. And even climate commitments are being rolled back or repackaged. The pendulum, it seems, is swinging the other way.

So you could be forgiven for thinking ESG is dying. But I don’t believe that’s what’s happening. In fact, I think it’s being replaced by something stronger, sharper, and much harder to ignore: risk.

The Pendulum Swings—But the Forces Stay in Motion

In the short term, it’s true that some businesses may feel they can back away from ESG. The political pressure is easing. Consumers may seem distracted. Regulation in some areas is stalling or being rolled back. And for those focused purely on quarterly earnings or short-term returns, ESG might look like optional fluff again.

But look slightly further ahead—into the five-, ten-, or fifteen-year horizon—and the picture looks very different. That’s where the cost of inaction starts to bite. Because if we don’t address ESG-related challenges today, we’re simply storing up massive liabilities for the future.

Here’s what’s coming:

 • Litigation risk is rising. Whether on climate, labour, or equity issues, we’re seeing an uptick in lawsuits targeting companies for failure to act—or for misleading their stakeholders. These cases are becoming more sophisticated, and their financial impacts are growing. Take the legal clash between Tony’s Chocolonely and Mondelēz: the cost of the legal wrangling and reputational blow likely outweighed what Mondelēz would have spent had they simply ensured fairer wages and better standards in the first place.

 • Regulatory costs are inevitable. As climate impacts worsen, governments will be forced to step in. Carbon taxes, reporting requirements, import restrictions—they’re all on the table.

 • Insurance models are being rewritten. In wildfire-prone California, major players like State Farm have stopped offering new cover in certain areas. Their traditional, historic models of risk just don’t hold anymore. And when insurance becomes harder to secure—or prohibitively expensive—that ripples through investment, operations, and supply chains. For businesses, that could mean stranded assets, paused development, and operational exposure that’s simply not covered.

 • Reputation and controversy remain costly. In a hyper-connected world, bad press spreads fast—and stock prices still suffer. Look no further than Unilever. After years of leadership on sustainability, a strategic pullback from climate focus under new management coincided with a drop in performance. It turns out those “soft” brand effects—trust, loyalty, halo value—are very real when you lose them.

 • Financial markets are ruthless. They may not reward good ESG credentials, but they will absolutely punish poor risk profiles. If you’re exposed—to litigation, regulation, stranded assets or public backlash—it gets priced in. Your share price drops. Your borrowing costs go up. And investors quietly shift their attention to someone else.

The Rise of Risk—And Why That’s a Good Thing

Here’s where the story gets interesting.

I’ve spent the last eight years trying to sell the value of sustainability and climate action to businesses—often through the lens of brand, reputation, or long-term positioning. And don’t get me wrong—those are real, powerful drivers. But they’re also abstract. They’re hard to quantify in the boardroom.

Risk, on the other hand, is sharp. It’s measurable. It hits profit and loss, share price, and operational cost. And increasingly, that’s how ESG issues will be framed. Not as values, but as exposures.

What is the risk of not adapting to a changing climate? What is the cost of supply chain breakdowns caused by ecological collapse? What’s the shareholder liability for poor governance or social failings? What are the financial implications of missing the transition to a low-carbon economy while your competitors surge ahead?

These are real questions with real numbers behind them. And the markets know how to price them. It won’t be long before they do—proactively, and at scale.

The Path Ahead: From Optics to Outcomes

So yes—maybe ESG is weakening. But what’s emerging in its place is something harder-edged, more tangible, and—crucially—more investable.

This is a shift from optics to outcomes. From vague principles to quantifiable risk. And if you care about climate action, social progress, or good governance—that’s a very good thing.

Because when ESG becomes risk, it gets real. It gets budgeted for. It gets talked about in the C-suite. It moves from the sustainability department to the finance team. And that’s when change starts to accelerate.

We’re entering a new era—the age of risk-adjusted sustainability. And I, for one, am ready for that conversation.