8.7 - THE ESG LABEL: From Ethical Guarantee to Market Crossroads

In the world of investing, three letters have shaped portfolios and headlines over the past decade: ESG (Environmental, Social, and Governance).

In France, a similar certification exists under the name ISR (Investissement Socialement Responsable). Both aim to signal that a fund respects certain ethical, social, and environmental standards.

Initially, ESG was far more than a trend. It was a safeguard. By meeting ESG criteria, a fund could assure investors that their money was not being used to finance industries tied to terrorism, illegal drugs, alcohol, tobacco, or weapons. For many, this was more than an investment choice — it was a moral commitment.

A Safety Net That Sold Itself

When the ESG movement gathered momentum, investment companies responded at lightning speed. They worked to ensure that most of their funds could carry the ESG label. Why? Because the market had spoken: investors, particularly institutional and long-term savers, were more inclined to commit capital when they knew it wasn’t supporting sectors perceived as harmful or controversial.

In this sense, ESG acted like a security stamp for portfolios — a quick way to reassureclients and differentiate a fund in a crowded market. It was also excellent marketing: brochures, prospectuses, and fund fact sheets proudly displayed the ESG badge, knowing it could be the deciding factor for capital allocation.

When Ethics Meets Geopolitics

This leads to a paradox: a stringent ESG filter may exclude investors from accessing defense-related possibilities while these industries may provide lucrative returns and meet vital social demands.

The Plateau Effect

ESG was the gold standard for responsible investment for a long time. Its growth curve is leveling out today. While some investors now consider it overly restricted, others wonder if the label has served more as a marketing gimmick than as a reliable indicator of ethical influence.

In France, arguments are continuing on whether ISR standards should change to match the realities of the modern economy : an indication that the entire ESG/ISR system might be entering a new phase.

Looking Ahead

ESG's capacity to change without losing credibility will probably determine how it develops in the future. The label may remain a useful resource for investors if it can successfully blend ethical rigor with practical investment.

But one thing is clear: the conversation around ESG is shifting from “Is this good for the planet and society?” to “Can this standard survive in today’s geopolitical and economic reality?”

  

RESSOURCES : 

● https://podcasts.apple.com/fr/podcast/sustainable-finance-guernsey-podcast/id1522875312

● https://www.ube.ac.uk/whats-happening/articles/criticism-of-esg/