ABSTRACT
The global ESG landscape is undergoing a profound transformation. While sustainability has become a central consideration in business and investment decisions, it now faces unprecedented political, regulatory, and communicative challenges. The pushback observed in recent years—particularly acute in the United States and increasingly visible in other regions—has prompted a re-evaluation of how ESG is understood, reported, and implemented.
Rather than weakening the sustainability agenda, this resistance is driving a new phase characterized by pragmatism, materiality, and accountability. Investors, companies, and regulators are adapting by simplifying frameworks, improving data reliability, and focusing on measurable financial relevance. Turning pushback into progress requires anchoring ESG in sound governance, transparent reporting, and effective stewardship. Sustainability will remain credible only if it is useful: useful for managing risks, improving profitability, and channelling capital toward long-term economic and social resilience.
Keywords: Pushback, Regulation, Narrative, Stewardship, Successful engagement, geographical differences, external expectations, regulators, clients, reporting, transparency, measurement, impact, value creation, Simplification, materiality, risks, resilience.
Key Findings
- ESG under pressure but evolving: The current ESG pushback—driven by political polarization, regulatory overload, and scepticism about financial materiality—has acted as a stress test, exposing weaknesses but also driving a more pragmatic, value-driven approach to sustainability.
- Shift in narrative: Across regions, the ESG conversation is moving from idealism to financial relevance. Stakeholders increasingly expect a focus on materiality, profitability, and long-term competitiveness.
- Quality over quantity in engagement: Asset managers are redefining stewardship—moving from counting engagements to measuring outcomes, and emphasizing data quality, material issues, and constructive dialogue.
- Innovation through resistance: Pushback has accelerated the development of more robust, transparent, and data-driven financial products, as well as the use of digital and AI tools to improve ESG data, reporting efficiency, and credibility.
- Need for simplification and convergence: Regulatory fragmentation continues to generate inefficiencies and asymmetries. Progress depends on clearer, interoperable standards and alignment between voluntary and mandatory frameworks.
Content
1. Understanding the Pushback
The ESG backlash is multi-dimensional. In the United States, political polarization has positioned sustainability as a cultural and ideological debate. In Europe, the main source of resistance arises from regulatory fatigue: while the EU has led the creation of a comprehensive sustainability framework (CSRD, SFDR, Taxonomy), the pace and complexity of reforms have generated confusion and operational strain.
Poor scientific communication (e.g. replication crisis in ESG academic papers1) and excessive activism have also weakened credibility, underscoring the need to rebuild trust through evidence-based narratives.
2. Reframing the Narrative
Sustainability must be repositioned from a compliance exercise to a driver of financial and strategic value. For companies, this means integrating ESG into the core business model, not treating it as a parallel activity. For investors, it requires emphasizing materiality—focusing on ESG factors that truly affect risk, cost of capital, and long-term performance.
The narrative is shifting from values-driven to value-driven, highlighting the role of sustainability in profitability, competitiveness, and resilience.
At Telefonica, efforts with regards to ESG are focussed on delivering value and reducing risk. Concrete examples include:
- We are actively preparing for and protecting the company against climate-related risks, including natural disasters. For example, we were well insured and operationally equipped to manage the aftermath of the Dana storm in Spain and the floods in Brazil.
- By being fair, transparent, and accountable, we strengthen both our reputation and our customer relationships. This is reflected in our steadily improving Net Promoter Score (NPS), which reached 33 in Q2 2025—an increase of 12 points since 2017.
- Our solutions contribute to global decarbonization—57% of our B2B portfolio is now labelled Eco Smart. Think remote work, smart agriculture, and intelligent manufacturing. Sustainability is not just a responsibility; it’s a revenue and growth driver, especially in regions like Europe and APAC where emissions reductions are mandated.
- Sustainability also enhances profitability. During the energy crisis, while energy prices soared, Telefónica was shielded thanks to long-term PPAs signed years earlier to secure renewable energy at stable costs.
- Being a responsible company is also key to attracting and retaining talent—particularly among younger generations. Our employee Net Promoter Score (eNPS) has risen consistently, reaching 75 in 2024.
3. Engagement Strategies that work
Effective engagement requires a shift from quantity to quality. Asset managers are increasingly prioritizing deeper interactions with companies, focusing on the most material issues—those directly connected to risk management, resilience, and long-term financial performance. The goal is no longer to measure success by the number of meetings held, but by the tangible changes those engagements produce.
Constructive dialogue supported by reliable, comparable data is essential to build trust and credibility. However, achieving this level of depth demands significant resources—both human and analytical. High-quality engagement requires time, specialized expertise, and access to robust data. As sustainability issues become more technical, asset managers must invest in capabilities for understanding sector-specific risks and in systems that integrate ESG information efficiently into investment analysis.
Recognizing these constraints, investors use different approaches to engagement, combining various models depending on their objectives, resources, and expertise. In some cases, this means working collaboratively with other investors or external partners to address systemic challenges, while in others, focusing on more targeted and direct dialogue with companies. What matters most is ensuring that each engagement is purposeful, well-informed, and capable of generating meaningful outcomes.
Engagement also extends beyond corporates. Dialogue with regulators plays an increasingly important role, as investors can offer practical insights on the implementation burden, costs, and potential unintended effects of new regulations. By sharing data and real examples, asset managers can contribute to shaping more balanced and effective sustainability frameworks.
Tailoring the message remains critical. For institutional investors, engagement should demonstrate financial materiality—how ESG issues translate into volatility, cost of capital, or long-term value. For retail clients, the focus must be on clarity and simplicity: explaining where their money goes, what impact it achieves, and how it performs financially. Storytelling can be powerful, but it must always be backed by credible evidence.
Ultimately, engagement is not a communication exercise—it is a strategic tool for driving change, managing risk, and strengthening stewardship credibility.
From a corporate perspective, Telefonica welcomes the chance to engage with investors. Engagement facilitates ongoing dialogue and enables the nuanced exchange needed to explain circumstances and collaboratively identify pathways that align with investors’ needs.
4. Innovation
Pushback has accelerated innovation in product design and reporting. Sustainability-linked instruments explicitly tie financing conditions to ESG performance. The ongoing review of SFDR and MiFID presents an opportunity to simplify disclosures and better align client preferences with product typologies.
The growing demand for proof and transparency is encouraging the use of digitalization and AI to identify inconsistencies, standardize information, and enhance forward-looking analysis, including scenario modeling and greenwashing detection. These tools can make engagement more effective by helping investors focus on the most financially relevant issues.
5. The Role of Investors and Asset Managers
Investors are adapting their stewardship models to a more polarized and uncertain environment. Asset managers have had to refine their approach to engagement and proxy voting, ensuring that decisions are grounded in clear financial rationale and adapted to regional sensitivities. The politicization of these themes—particularly in the U.S.—has demonstrated the importance of consistency in principles and proportionality in application.
Another key challenge is maintaining collaborative momentum. The withdrawal of certain large investors from collaborative engagement initiatives has tested the resilience of these alliances. For those who remain, the responsibility is twofold: to demonstrate that collaboration is not ideological but pragmatic, and to ensure that collective action continues to produce measurable impact. This moment of transition can also be an opportunity to strengthen purpose, sharpen priorities, and foster greater accountability within engagement coalitions.
At the same time, investors are enhancing the sophistication of their stewardship. The focus is shifting from measuring activity to evaluating results. Engagements are becoming more thematic and data-driven, emphasizing materiality and decision-useful information. Asset managers are also expected to be transparent about their escalation policies—how they act when companies are unresponsive—and to clearly explain their voting decisions, particularly on sensitive climate or social resolutions.
Finally, investors must continue to act as a bridge between markets, companies, and regulators. They have a unique position to promote coherence and interoperability across frameworks, advocate for pragmatic and proportionate regulation, and encourage data quality and comparability. Stewardship, in this sense, is not only about influence over investee companies, but also about contributing to a more stable, credible, and efficient sustainability ecosystem.
In summary, the role of investors must combine long-term vision with operational discipline, balancing ambition with realism. The objective is clear: to ensure that ESG integration remains not a matter of belief, but a matter of sound investment practice and responsible capital allocation.
6. Looking Ahead
Progress over the next years will depend on:
- Simplification and convergence of reporting frameworks to improve comparability and reduce inefficiency.
- Better data quality, enhanced through technology and human oversight.
- Outcome-based measurement, focusing on real progress rather than volume of disclosure.
- Balanced integration, embedding sustainability into financial strategy while maintaining proportionality and pragmatism.
- Commitment to engage – both from Asset Managers and corporates. It is a long-term play, which may derive value in the short term, but most certainly in the long-term.
Conclusions and Proposals
The current ESG pushback has acted as a catalyst for change, compelling investors, companies, and regulators to focus on what truly matters: materiality, proportionality, and impact. Rather than weakening the sustainability agenda, this period of skepticism is fostering a more mature, evidence-based approach—one that connects ESG performance with financial outcomes, competitiveness, and long-term value creation. Progress now depends on simplifying regulatory frameworks, ensuring consistency across jurisdictions, and improving the quality and comparability of data through technology and sound governance.
Looking ahead, the challenge is to transform disclosure into meaningful action and engagement into measurable outcomes. Building trust requires transparency, credible metrics, and a narrative that emphasizes pragmatism over ideology. The way forward is clear: focus on what is material, communicate with clarity, and collaborate effectively. ESG will remain credible only if it proves useful—for investors managing risks, for companies strengthening their business models, and for society seeking sustainable growth.
Authors
- Catherine Bohill – ESG Development and Impact Director, Telefónica
- Lara Altable – Head of Stewardship & SRI Policies, Santander Asset Management
- Cristina Aldamiz-Echevarría – Head of Associates, Operations & Sustainability, Grupo ACS
- Moderator: Ignacio Rodríguez, Chief Distribution Officer Americas, M&G Investments
Furthermore, this document is signed in a personal capacity and does not represent the official position of the institutions or entities to which the author may belong.
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