By Robert Lewenson, Head of Responsible Investment, Old Mutual Investment Group

CAPE TOWN, SOUTH AFRICA, November 28, 2025 /EINPresswire.com/ -- The anti-ESG movement championed through parts of the US and beyond, has cast the incorporation of ESG factors into investment decision making as a political agenda rather than a financial discipline. Its neat narrative – that considering ESG factors detracts from investment performance, introduces red tape, and is an unnecessary constraint on free markets – makes for good headlines. However, it misses, and also distracts from, the fundamental point of investment management principles, one that is worth re-emphasising; this is that considering ESG factors in the investment process is built on the investment principle of risk management i.e. risk-adjusted returns.

Considering ESG factors is not about ideology, it’s about practical risk mitigation. As such, the dismissal of ESG as a core investment principle should not be viewed as a stand against politics or left-leaning policies, but rather as a reckless act of wilful blindness to risks that can negatively impact the underlying value of assets.

ESG is due diligence
The anti-ESG movement has created a false narrative that consideration of ESG factors compromises the maximisation of returns. To maximise returns, management of downside risk must be factored into the investment process. Asset managers have a fiduciary responsibility to analyse and understand what is financially material to the companies that they invest in. Investors don’t analyse governance failures, supply chain risks, or climate exposure because they want to signal virtue. They do it because of the risk that these factors pose to underlying asset value.

To understand why anti-ESG sentiment has been allowed to ramp up the way it has over the past few years, we need to look beyond the rhetoric and understand that ESG investment is not an alternative investment approach which proponents of anti-ESG frame their argument around. Investing is generally understood as putting “money” into an asset with the expectation of capital appreciation, dividends, and/or interest earnings. Considering material ESG factors as part of the investment process, which either detract or enhance the underlying value of an asset, provides a greater prospect of the asset meeting the expectation of a future return on investment.

The world has evolved and, as such, we cannot only rely on how classic investment theory measures wealth. The dominant yardstick for this globally has been Gross Domestic Product (GDP). Yet GDP fails to capture the true cost of externalities. This gap means that long-term systemic risks such as climate, social inequality or health, are not adequately reflected in investment return models. As long as negative externalities remain mispriced, the concept of risk-adjusted return is fundamentally weakened.

The difficulty with externalities lies precisely in their nature: they are external, and as such, unpriced. Take the example of a company whose products contribute to widespread ill health. Because the related healthcare costs are not directly priced into the product, the company is able to profit while society bears the burden. Over time, however, the economic system responds—whether through healthcare providers, insurers, or governments—by internalising these costs. At that point, mechanisms such as taxes, regulations, or restricted market access begin to reflect the risk.

Considering the impact of externalities at a company level, Steinhoff didn’t collapse because it was “too ESG”, Tongaat Hulett didn’t implode because of “woke accounting”, BHP didn’t attract material legal liabilities because of progressive politics. These disasters were born of ignored governance, social, environmental, and operational risks—the very territory ESG integration in investment decisions seeks to map and manage.

Beyond the rhetoric, the world is moving on
While US politicians continue their campaign against ESG, the rest of the world is moving decisively in the opposite direction. The EU is embedding disclosure requirements, Asian regulators are tightening standards, global supply chains are aligning to sustainability expectations. Multinationals accept that competitive advantage in the next decade will rest on resilience to manage ESG risks and opportunities appropriately, whether politicians admit it or not.

Reflecting on where we are as a responsible investment manager in respect of climate change commitment, we have recently analysed our top 50 companies by market capitalisation, including our top emitters, and noted that they have generally showed positive progress in their commitments to achieving net zero or at least carbon neutrality by 2050 or sooner. Geopolitics and the challenging economic conditions in our local market could have tempered these companies’ commitments towards climate action, yet their net zero strategies remain on track. As at the end of 2024, we had engaged almost every one of the top 10 greenhouse gas emitters in South Africa including Eskom. Of the top 50 listed companies:
• Only nine companies have yet to set long-term (carbon neutrality and net zero) targets.
• Two of those nine companies, Remgro and KAP, are in the process of approving long-term targets.
• Northam Platinum, while not yet committing to a long-term target, has committed to have reduced the quantum of GHG emissions by 27% and the intensity by 60% by 2030, against a 2019 baseline.
• We have held engagements with 82% of these companies on their climate commitments and net zero.

Don’t confuse politics with investing
The anti-ESG political noise and rhetoric has been loud. But investors should see it for what it is: political theatre. ESG is not about ideological values—it is about protecting value. It is about recognising that governance failures, social fractures and environmental shocks are not abstract risks but clear, material threats to portfolios – externalities that need to be considering, engaged on and priced.

Investors who allow political noise to drown out this market imperative will pay the price where they least expect it and where it matters most—in returns.

Sharmila Jaga
Old Mutual Investment Group
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