The ESG Bubble Is Bursting

The return of a pro-energy Republican to the White House has corresponded with the bursting of the “ESG” bubble. ESG stands for “environmental, social, and governance,” and ESG funds invest with those principles in mind, not merely to maximize shareholder returns. Through the first quarter of 2025, U.S. ESG funds have seen ten consecutive quarters of net capital outflows. That’s a promising start, but we need to stay vigilant—ESG activism reduces economic growth, shrinks our tax base, and weakens our national security.

ESG funds do more than just invest in companies that meet environmental, social, and governance goals. They often strong-arm publicly traded corporations to subvert shareholder value in pursuit of nebulous concepts like sustainability, diversity, and “stakeholder” capitalism. Their goal is to effect social change outside the normal political process, one of several forms of policy adventurism I explore in my 2020 book, The Unelected: How an Unaccountable Elite Is Governing America.

Though investors have always chosen to allocate their funds according to principles beyond just maximizing profit, the organized focus on ESG factors is of relatively recent provenance. The ESG moniker traces to late 2004, when the United Nations Global Compact released a report seeking to “connect” social policies with financial and corporate action. By 2006, the UN had cajoled various large financial institutions and stock markets into signing its “Principles for Responsible Investment.” By 2018, more than one-fourth of U.S. capital in professionally managed portfolios was under the ESG umbrella.