Why exactly has ESG been cancelled?

The terms "Environmental, Social, and Governance" (ESG) have recently come under scrutiny, leading many companies to shift towards using "sustainability" or "green" in their communications. This change to "cancel" ESG is influenced by several factors, including regulatory pressures, political dynamics, and concerns about greenwashing.

As previously mentioned in our post, the prestigious CFA Institute's Certificate in ESG Investing course is also going to be renamed to Sustainable Investing Certificate on 8th April 2025).

Regulatory Developments:

As per Deloitte, in Europe, the European Securities and Markets Authority (ESMA) has introduced guidelines to prevent greenwashing by ensuring that fund names accurately reflect their investment strategies. These regulations stipulate that funds using terms like "sustainable" or "green" must allocate at least 80% of their assets to investments that meet specific environmental or social criteria. Additionally, funds with such labels are prohibited from investing in companies involved in activities like fossil fuel extraction.

Political Influences:

FT also reports that in the United States, the political landscape has significantly impacted ESG initiatives. The re-election of Donald Trump has led to threats of rolling back sustainability policies, prompting financial institutions to reassess their commitments to ESG principles. Consequently, some companies are removing ESG-related goals from executive compensation plans, reflecting a broader shift away from ESG terminology

Greenwashing Concerns:

The proliferation of ESG-related terms has raised concerns about greenwashing—where companies overstate their environmental or social efforts. Deloitte has reported that to address this, regulators are enforcing stricter guidelines on fund naming conventions to ensure transparency and accuracy. For instance, the UK's Financial Conduct Authority (FCA) and the U.S. Securities and Exchange Commission (SEC) have introduced rules restricting the use of ESG-related terms in fund names to prevent misleading claims.

Shifting Terminology:

In response to these challenges, many companies are transitioning from using "ESG" to "sustainability" or "green" in their communications. As per RF, a survey by the Conference Board found that 48% of companies facing ESG-related backlash have adjusted their terminology, often replacing "ESG" with "sustainability." This shift aims to align with broader public understanding and mitigate potential criticisms associated with ESG labeling.

But what's going on in India?

In India, the terms "Environmental, Social, and Governance" (ESG) have not been banned; rather, their usage has evolved within the regulatory and financial landscape. Times of India reports that the Securities and Exchange Board of India (SEBI) has played a pivotal role in shaping ESG disclosures. In 2020, SEBI mandated that the top 1,000 listed companies disclose ESG-related information in their annual reports, starting from the financial year 2021-22. This move aimed to enhance transparency and align with global sustainability standards.

However, the regulatory framework for ESG in India is dispersed across various statutes and sector-specific regulations, with different ministries and regulators overseeing compliance. As per Legal 500, there's no consolidated ESG legislation, which can lead to complexities for businesses navigating these requirements.

In response to the growing emphasis on sustainable finance, SEBI has introduced a framework for listed issuances of green debt securities. Initially established in 2017 and revised in 2023, this framework aims to broaden the scope of sustainable finance-related security issuances beyond environmental sustainability.

While "ESG" continues to be used, there's a noticeable shift towards terms like "sustainability" and "green." This shift is partly due to the need for clearer communication in the face of complex regulations and to address concerns about greenwashing. Green Central Banking reports that aligning with global trends, the Reserve Bank of India (RBI) has released draft guidelines on climate-related financial risk disclosures, aiming to mainstream climate risk assessment in the financial sector.

The evolving landscape of ESG terminology reflects a complex interplay of regulatory actions, political influences, and societal concerns. As companies navigate these changes, adopting clear and accurate language such as "sustainability" or "green" is becoming essential to maintain transparency and trust with stakeholders. In summary, the evolution of terminology from "ESG" to "sustainability" or "green" in India reflects a dynamic regulatory environment and a strategic approach to meet both domestic and international sustainability objectives.

Navigating a career can be difficult and overwhelming, especially in an industry like sustainability, where policies play a crucial role. Our aim at Green Jobs India is to make this easier by providing you all required resources to make this transition simpler. If you would like to connect or provide any feedback, please contact us or reach out on hello@greenjobsindia.in

Also read: The Future of Green Finance Careers