BlackRock’s support for environmental and social shareholder resolutions fell from over 40 percent in 2021 to under 2 percent in 2025. That number tells you almost everything you need to know about the state of ESG investing.
Not because it signals that responsible capital allocation is failing. But because it exposes the fundamental confusion at the heart of the ESG project: the conflation of disclosure with impact, of governance reporting with economic transformation, of signalling with substance.
The retreat is accelerating. In the United States, anti-ESG political pressure, compounded by litigation and regulatory challenge, has prompted the largest asset managers to quietly unwind their most visible commitments. In Europe, the pressure runs in the opposite direction yet the result is the same structural tension. Investors are caught between competing political narratives, having built frameworks that were never designed to navigate them.
The deeper question the one that a forthcoming academic paper I have been involved in addresses directly is whether ESG was ever the right vehicle for the economic transformation it claimed to pursue.
ESG has trained capital markets to ask whether a company reports well. What it has not trained them to ask is whether the world is actually changing.
The Allocation Problem
Wallace D. Wattles, in The Science of Getting Rich, drew a distinction between what he called the “competitive plane” and the “creative plane.” On the competitive plane, value is fought over and redistributed. On the creative plane, it is generated. His argument was that lasting prosperity for individuals and for economies requires operating on the creative plane: producing new value, building new capacity, deploying resources in ways that multiply rather than merely move.
ESG, at its structural core, operates on the competitive plane. It does not primarily concern itself with what is being built. It concerns itself with how existing assets are governed, disclosed and rated. The metrics that determine an ESG rating carbon reporting, board diversity statistics, supply chain policies are largely backward-looking compliance measures. They tell us how a company managed its past. They tell us very little about whether that company’s capital is generating new productive capacity in the world.
The forthcoming research, which compares ESG-labelled capital allocation systematically against both traditional philanthropy and Enterprise-Driven Philanthropy, makes this case with academic precision. The findings suggest that ESG frameworks, while expanding awareness of responsible investment, are often more focused on reporting standards, environmental disclosures and governance mechanisms than on productive ecosystem development. High-visibility, politically acceptable projects attract capital; sectors where long-term transformation is most needed industrial development, infrastructure, productive capability formation can remain chronically underfunded.
This is not an argument against governance standards or environmental accountability. It is an argument that disclosure-based frameworks, however sophisticated, are a floor not a ceiling. They establish minimum conditions. They do not create economic change.
What Transformation Actually Requires
The research draws on a decade-long embedded capital case in Sierra Leone to illustrate the difference. Capital deployed with operational accountability, reinvestment discipline and a long enough time horizon generated not just direct employment and infrastructure, but cascading effects: supply chain development, local processing industries, institutional strengthening, expanded economic participation. The impact was not linear. It compounded.
ESG frameworks were not designed to produce this. They were designed to make it easier for institutional investors to screen out the worst actors and report their approach to beneficiaries. That is a legitimate and limited objective. The problem is not that ESG promised too little. The problem is that it began to promise too much and that the gap between its rhetoric and its structural capacity became wide enough to generate both political backlash and genuine investor disillusionment.
Wattles was precise on this point. He argued that thinking in terms of competitive redistribution even well-intentioned redistribution ultimately limits the total value available to everyone. Only creative, additive, productive thinking expands the system. The implication for capital allocation is uncomfortable but important: frameworks built around restriction and disclosure may inadvertently constrain the very productive investment that developing economies require most.
The question is not whether capital is clean. It is whether capital is working building, compounding, transforming.
The Opportunity in the Vacuum
The ESG retreat, combined with the collapse of traditional development assistance the OECD recorded the largest single-year drop in official development aid in 2025 has created a significant vacuum in the frameworks available for directing private capital toward social and economic transformation.
This vacuum is also an opportunity. It creates space for models grounded in a more rigorous theory of how capital actually generates change. Enterprise-Driven Philanthropy, as the forthcoming research argues, offers one such model: one that embeds ownership, operational accountability, measurable performance and reinvestment directly into the structure of capital deployment, rather than adding them as a reporting layer after the fact.
The institutions and investors now questioning the ESG consensus are not, for the most part, questioning the importance of social and environmental outcomes. They are questioning whether the current frameworks actually deliver them. That question deserves a serious answer grounded in evidence, comparative analysis and a clear theory of how productive ecosystems are built.
That answer is beginning to emerge. The forthcoming paper represents the most systematic comparative examination of these questions yet undertaken, setting EDP, traditional philanthropy and ESG alongside one another against a rigorous analytical framework. Its publication, expected within the coming months, arrives at exactly the moment the field most needs it.
The academic paper “Enterprise-Driven Philanthropy as a Scalable Impact Model” which includes a direct comparative analysis of ESG capital allocation frameworks will be published shortly. It offers the evidence base that the current debate about responsible capital allocation has been lacking.