What is the history of ESG?

What is the history of ESG (environment, social and governance)? First and foremost, the concept is older than you might think. Since the year 2000, it has grown exponentially in importance and, love or hate it, ESG now impacts every organisation in one way or another. 

Experts recently claimed that financial firms worldwide would have “no choice” but to embrace it.

The modern concept of ESG, which we’re so familiar with today, took shape in the mid-2000s. However, the principles behind ESG are decades, even centuries old. It depends on where you draw the line. Theoretically, for example, we could look at efforts to improve basic labour conditions during the industrial revolution as efforts in the “S” and “G” categories. We could also look at initial efforts to pursue cleaner air in cities during the same period as efforts in the “E” category. 

In general, ESG-related efforts in the pre-ESG world are often attributed to religious groups engaging in mission work or relief activity. Only in the late 20th century did mainstream business become increasingly associated with efforts to protect the planet and its people, according to a 2021 study by Alice Martini.

Since the start of the 20th century, there have been many efforts in business that we’d associate with ESG in a modern context. It’s just that they existed in isolation, to address specific issues, without any connection to a broader movement. Such campaigns dealt with things like child labour, workers’ rights, and the role of women in the workplace. Others dealt with things like how business operations impact local communities (often, these were motivated by scandals or accidents, and the desire to never see them recur).

Over time, these efforts ensured new laws in many countries, but their coming together under one banner would not happen until the new millennium.

A 2004 report from the United Nations – titled Who Cares Wins – carried what is widely considered the first mainstream mention of ESG in the modern context. 

This report was a milestone in that it discussed environment, social and governance together, demonstrating their dependence on each other and potential impacts on the world at large. It also framed this discussion in a collaborative context, explaining that ESG wasn’t just something for politicians and diplomats, but a wider effort that could translate to business strategies on a grand scale. To that end, it heavily encouraged all business stakeholders  – managers, directors, investors, analysts, brokers – to embrace ESG in the long term. 

By no means did ESG as a concept win the backing of all businesses and governments at this time, but in hindsight, we can see the principles began to take hold from this date.

These developments were aided by the fact that, at the same time, there was a dramatic increase in international attention on issues such as environmental protection and social policy. Rapidly, people cared more about sustainability, respect and diversity in the workplace. Campaigns on these issues haven’t waned since.

Over time, the development of ESG has centred on transparency. It’s all well and good to have principles, but governments, investors and consumers have grown incredibly strict about seeing those principles translate to action. Nowadays, companies have to show what they’re doing, why they’re doing it, and what results they have seen when it comes to ESG.

Because of that, the focus has zeroed in on reporting. It’s the only way that companies can communicate their ESG progress to other stakeholders. Global standards in ESG reporting don’t exist yet, but governments are setting new laws all the time to try to ensure that any company’s data makes sense in isolation and in comparison with others in the industry.

Laws mandating top-quality ESG reporting include CSRD in the European Union, Climate-related Financial Disclosure) Regulations in the UK and the Enhancement and Standardisation of Climate-Related Disclosures for Investors from the American Securities and Exchange Commission (SEC)

We know now that ESG enjoyed far more mainstream support in the years leading up to 2020. As of 2026, that picture has fractured. ESG has become caught in polarised politics; it’s a trend that began in the United States and, due to that country’s worldwide influence, has spread from there into other regions.

Critics of ESG have often labelled it as “woke capitalism” and say it forces investors to shy away from maximum returns. 

How has this changed things? One main impact has been investor sentiment: they simply don’t show the same appetite for ESG as they may have done ten, even five years prior. According to Morningstar, global sustainable funds saw $84 billion in net outflows in 2025 – a big change from the $38 billion in inflows recorded in 2024. Meanwhile, many ESG or sustainability-oriented roles in major organisations are disappearing or being consolidated.

However, the big argument against this trend is the sheer size of investment that remains with ESG. Fortune Business Insights estimates that the global ESG investing market was worth US$ 39.08 trillion in 2025, with a projected growth to $45.61 trillion in 2026, and to $180.78 trillion by 2034.

In short, the backlash doesn’t look to be anywhere near enough to stem the flow of support for ESG, even if that support might be more “under the radar” for a few years while political debates play out in the public sphere. ESG proponents argue that incorporating ESG principles into corporate strategy is a key driver of long-term success. For now, it looks as though investors continue to believe that, regardless of rhetoric.

The current picture represents a challenge for boards for two simple reasons: compliance and reporting.

Beyond the backlash, ESG-related principles are still being codified into national law in several key regions, like the EU and MENA. What’s more, these laws are designed to stretch beyond those borders. So, for example, if you’re on the board of an American company that’s part of a supply chain feeding a European partner, that partner may come to you for your emissions data, social metrics, or other related numbers, because they need to feed it back to their European regulator as part of current ESG reporting rules.

In short, it means ESG-related skillsets are essential. Your board and C-suite should have personnel who can understand ESG from a compliance perspective, who know the ins and outs of reporting standards, and who can correctly oversee vast amounts of data and ensure it paints a correct picture of an organisation’s performance.

The term “ESG” has only enjoyed global prominence for two decades, but the principles feeding it are far older. 

Ultimately it is all about responsible investing in ethical business practices, and it fluctuates over time depending on what different market generations care about.

• Socially responsible investing: from the ethical origins to the sustainable development framework of the European Union
• Who Cares Wins
• Corporate sustainability reporting
• Climate-related Financial Disclosure Regulations 2022
• The Enhancement and Standardisation of Climate-Related Disclosures for Investors
• ESG Funds: 2025 Closes With Continued Outflows Amid Persistent Headwinds
• The ESG jobs crunch is coming
• ESG Investing Market Size