ESG is a complex institutional system about whose workings many books could be written. Within this lexicon, only an introduction is provided.
The so-called ESG standards consist of the components Environmental (environment), Social (society), and Governance (corporate governance). The origin of ESG standards dates back to the UN initiative “Principles for Responsible Investment (UN PRI)”. Founded in 2005, this “initiative for responsible investing” has dedicated itself to lobbying for ESG standards in the financial world. Using ESG standards, the supranationally agreed sustainable development goals (Sustainable Development Goals, SDGs) of the UN Agenda 2030 are to be supported by the private sector. The ESG model is intended to serve as a tool for the UN Agenda 2030 and bring about a global economic transformation from the capitalist “shareholder” model to the new “stakeholder” model.144
According to the official view, ESG standards are meant to create a corporate culture that proactively incorporates “social, ethical, and ecological considerations” into decision-making to increase positive impact on the world.145 This type of “impact investment” is also claimed to be more successful in the long term. The official thesis that irresponsible corporate management and lack of societal and ecological responsibility lead to long-term disadvantages seems plausible at first glance. Unfortunately, no one can foresee the complex issues of long-term corporate policy, let alone societal and environmental policy. Therefore, free competition for the best path remains necessary. However, the ESG system influences fair and free competition.
Major investment firms such as BlackRock, Vanguard, Goldman Sachs, State Street, JP Morgan Chase, and Fidelity are particularly involved in shaping ESG. Governments and political organisations are now also involved in ESG regulation and oblige companies to comply, with the EU taking a pioneering role.146 Non-governmental organisations (NGOs) also play a significant role in the complex regulations. But what do these ESG standards regulate?
“Environmental”: Important “stakeholders” (including the United Nations, the EU, the World Economic Forum, and NGOs) prescribe what they consider exemplary environmental policy.147 By rating companies on their environmental impact, an important contribution to climate and environmental protection is to be made. A good environmental ranking in the EU is achieved by implementing measures from the so-called “Green Deal”: everything is to be electrified and operated entirely with electricity from renewable sources. Nuclear power is not considered sustainable enough. Sceptics would say that E actually stands for energy scarcity. Instead of relying on market incentives, a planned-economy rating system is installed as a so-called “climate taxonomy”.148
“Social”: The S comes from the “Corporate Social Responsibility” movement, which was hijacked by woke identity politics. Here, social justice and equality are primarily promoted: under the S rating, “Diversity, Equity, and Inclusion (DEI)” departments are established, (anti-)racist quotas are set as diversity, and training on “unconscious bias” and “antiracism” is mandated.149 Entrepreneur and author Vivek Ramaswamy described these trainings as places of fear where employees are required to adopt a woke mindset.150
S criteria are a major reason why almost no large companies want to forgo costly DEI departments: since asset managers like BlackRock control vast amounts of capital, it is considered dangerous to violate ESG guidelines. BlackRock demands more “racial social justice”: to meet prescribed quotas, all companies must provide information on their racial and sexual composition.151
“Governance”: Officially, G stands only for good corporate governance. While some standard criteria for good corporate governance are indeed relevant in this rating, there are also questionable criteria: for example, the obligation to produce extensive ESG analyses, reward boards for their ESG commitment, and hire sufficient ESG controllers.152
It is still difficult to predict the impacts of the global ESG agenda. Economically, dominant market players in particular have an interest in so-called “ESG capture”: those large enough to bear ESG costs wait until less well-capitalised competitors are driven out of the market. They offset their ESG costs with gained market shares. Thus, ESG investments not only lead to politicisation of the economy through party-political activism but also to the strengthening of large corporations.153 From the 2025 business year, numerous companies in the EU are obliged to report on their activities according to ESG criteria.154