Five-Minute Brief: Navigating Sustainability in the Age of Uncertainty

The sustainability landscape is transforming with important implications for companies and investors. Converging global macro trends, such as political polarization, geopolitical instability, rising economic inequality and an accelerating climate transition, are reshaping the landscape of environmental, social and governance (ESG) risks and opportunities, and prompting companies and investors alike to revisit both their strategies and disclosures to ensure their suitability for a changing world.

Understanding the ESG Backlash

One notable shift is the so-called ESG backlash. Born of misguided, partisan attacks on “woke capitalism” dating back several years, the backlash is primarily a U.S. phenomenon driven in part by an intentional public relations and legal campaign by several Republican-led states in the U.S.^[1],[2] While initially isolated, this anti-ESG sentiment has begun to affect broader market dynamics, particularly in the aftermath of the 2024 U.S. presidential election. ESG-labeled funds have seen consecutive years of net outflows,^[3] support for ESG-related shareholder resolutions has declined,^[4] several investors and financial institutions have exited net-zero alliances^[5] or rolled back targets^[6] and many businesses in the U.S. are rolling back diversity, equity and inclusion (DEI) commitments.

There are distinct features of the Canadian market, such as formal disclosure standards, that have and may continue to limit the extent to which the backlash travels north of the border. Nonetheless, we have observed spillover effects in Canada, particularly amongst those with U.S. market exposure.

A Rapidly Maturing Industry

These headwinds, while important, don’t tell the whole story. The backlash has coincided with accelerating sustainability and climate progress and a rapidly maturing industry. Investors overwhelmingly accept the financial materiality of ESG risks and opportunities.^[7] A number of recent surveys have shown that investors remain committed to ESG integration^[8] and disclosure.^[9] Investment in the energy transition also remains strong.^[10] A recent statement from institutional investors with USD 1.5 tn in funds asked asset managers to actively manage climate risk in their investments,^[11] and we have begun to see early signs of asset owners pulling investments from managers who are not meeting ESG expectations.^[12] A recent open letter of Canadian tech industry leaders defended DEI programs from potential rollback by a peer.^[13]

These conflicting pressures are further complicated by the emergence of mandatory disclosure standards across jurisdictions globally. Capital market participants require complete, comparable and accurate information upon which to make decisions. Mandatory disclosure standards are seen as the solution to that problem, intending to bolster transparency as well as the discipline and integrity with which sustainability and climate information is measured and managed. These requirements bring new challenges for organizations, increasing reporting efforts and inviting new scrutiny on potential gaps between ambition and action. This has culminated in greenwashing concerns; the practice of misrepresenting a product or business’ sustainable attributes. These concerns—far from being a symptom of further backlash—are in fact a bellwether of an industry evolving to play an evermore critical role in the future of capital markets.

Moving Forward with Confidence

The tension between ESG maturing into a disciplined, embedded business practice in some areas while facing considerable pushback in others is understandably obscuring the path forward. Now more than ever, businesses have to navigate competing stakeholder demands, legal and reputational risks, as well as regulatory uncertainty with courage and conviction.

Here are the implications we see for companies and investors:

1. Competitive advantage for those who stay the course

While the landscape has evolved, the fundamental drivers for sustainability integration have not. Companies and investors will continue to face significant business risks and opportunities related to sustainability and climate change. The economic argument for climate transition, for example, is well-founded, including the continued decoupling of GHG emissions from economic growth in certain regions.^[14] Team diversity has been correlated with increased profitability, innovation, lower attrition and better cultures.^[15] At the same time, sustainability and climate-related risks are also escalating rapidly across geopolitical borders. In 2024, natural disasters contributed to a staggering USD 368 bn in global economic losses.^[16]

The current environment will no doubt lead to some backsliding on sustainability, especially from those with less mature programs. However, this withdrawal will create a significant competitive advantage for those who stay the course. Companies who continue to prioritize ESG will see opportunities to attract talent others can’t, realize opportunities that others won’t and build businesses that are more resilient.

2. Deep strategic focus on materiality, value creation and risk management

We anticipate investors and companies will begin applying a rigorous focus on how sustainability contributes to value by managing risks and capturing opportunities. To this end, they will need to focus on what is financially material and drives value for primary stakeholders. The choice is fundamentally whether to do so proactively or reactively. Those with strong foresight are taking tangible steps today as the physical impacts of climate change intensify by investing in operational resilience to mitigate asset damage and supply chain disruption.

For some, this means a strategic recalibration to focus more narrowly on core issues affecting the business. These changes offer a unique opportunity for a reset and new clarity on sustainability and climate, anchored in strategic business priorities, competitive differentiation and value.

3. Disciplined, decision-useful disclosure

As scrutiny over ESG disclosures increases and mandatory disclosure requirements come into effect, we anticipate reporting will become more precise and substantive. This means less narrative and storytelling, and more useful information on material impacts, risks and opportunities alongside tangible commitments and actions to manage them. In short, progress over promotion.

Beyond those companies that are covered directly by requirements, we expect disclosures market-wide to increasingly align with reporting standards to manage greenwashing risks while still providing essential information to relevant stakeholders.

4. The critical role of boards

As dissonant external pressures mount, management teams will need to resist reactionary short-termism. Boards will play a critical role in stewarding companies through uncertainties, and challenging management where strategies are too myopic or neglect long-term business value. To do so, it is essential that boards are equipped with the necessary skills to interpret the risk and opportunity landscape accurately and help management navigate strategically.

You can read more about our board recommendations for effective climate governance here.

Develop a Sustainability Strategy that Drives Business Value

At Quinn+Partners, we advise businesses and investors to embrace sustainability and the climate transition and excel in a changing world. If you are looking to establish strong board and executive level governance or develop strategic foresight to navigate with confidence, please get in touch.

[1] State of Florida, Joint Governors Policy Statement on ESG, 2023

[2] How Environmentally Conscious Investing Became a Target of Conservatives, NY Times, 2023.

[3] US Sustainable Funds Landscape 2024 in Review, Morningstar, 2024.

[4] Harvard Law School Forum on Corporate Governance, ESG Shareholder Resolutions, 2024.

[5] Investor climate group suspends activities after BlackRock exit, Reuters, 2025.

[6] Wells Fargo drops financed emissions target amid ESG rethink, Reuters, 2025.

[7] Voice of the Asset Owner Survey, Morningstar, 2024.

[8] Semi-Annual ESG Sentiment Study of Canadian Institutional Investors, Millani, 2025.

[9] 2025 Executive Benchmark on Integrated Reporting, Workiva, 2025.

[10] Energy Transition Investment Trends, BloombergNEF, 2025.

[11] Long-term investors split with asset managers over climate risk, Financial Times, 2025.

[12] Top UK pension fund pulls £28bn from State Street over ESG retreat, Financial Times, 2025.

[13] Hundreds of tech leaders condemn Shopify diversity rollbacks, defend DEI in open letter, Globe and Mail, 2025.

[14] The relationship between growth in GDP and CO2 has loosened; it needs to be cut completely, International Energy Agency, 2024.  

[15] Diversity Wins: How Inclusion Matters, McKinsey & Company, 2020.

[16] Climate and Catastrophe Insight, AON, 2025.