A term that went from euphoria to criticism. That has been the parabolic path of sustainable investing in recent years. Now, investors wonder what’s in store for environmental, social and governance (ESG) investing in 2023, and more importantly, what the threats to ESG might be.

“Sustainable investing and the consideration of ESG factors have become part of the investment mainstream over the past few years. The rapid growth has been spurred by the need for investors to consider nonfinancial risks posed by problems ranging from climate change to natural resource depletion, treatment of workers throughout the supply chain, corporate ethics, and wealth inequality,” Jon Hale, director of sustainability research for the Americas at Morningstar Sustainalytics, says.

“We live in an age of transparency, and stakeholders are demanding better corporate accountability around these types of issues. More end investors want their investments to make a difference,” he adds.

ESG Came Under Attack in 2022

Sustainable investing is in the mainstream now, but it came under attack in 2022. Morningstar experts identified five main threats to ESG in 2023, that could be of interest to UK investors.

1. The Rise of Anti-ESG Forces
2. A Step Backwards on Climate Action
3. Increased (or Increased Confusion Around) Greenwashing
4. Lack of Standardisation in Key ESG Information
5. Underperformance of ESG Securities

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