The global narrative surrounding Environmental, Social, and Governance (ESG) investing is under siege. Once heralded as a revolutionary approach to aligning capital with sustainability, ESG is now facing political hostility, economic uncertainty, and ideological skepticism. In the United States, the administration of President Donald Trump has branded ESG as “woke,” framing it as a distraction from profit-driven investing. His administration also withdrew from the Paris Agreement and issued the “Putting America First in International Environmental Agreements” Executive Order, limiting U.S. financial contributions to global climate mitigation and adaptation efforts.[1] These moves raised concerns about a potential domino effect, where other countries might follow suit in downgrading or abandoning climate commitments.[2] There is a fear that this could lead to a broader depreciation of global climate ambition.
Beyond the U.S., the world is grappling with a volatile mix of trade tariffs, geopolitical tensions, and shifting economic alliances—termed “global disorder”—that threatens to sideline ESG in favour of short-term gains. Yet, the climate crisis, evident in Malaysia’s intensifying floods and globally through droughts, storms, and wildfires, underscores that abandoning ESG is not an option. For Malaysia, an export-oriented nation navigating these turbulent waters, ESG is a strategic imperative to build resilience, ensure competitiveness, and secure a sustainable future. Far from being dead, ESG is undergoing a critical reset, and Malaysia is poised to lead in this new era.
The Global Assault on ESG: Politics over Performance
The attack on ESG is primarily political, not a reflection of its financial merits. In the U.S., ESG has been portrayed as ideological overreach, allegedly prioritizing social agendas over shareholder value. This rhetoric is designed to create market panic, leveraging the herd mentality of investors. The reality is that ESG was never a dominant force in the U.S. investment landscape, making the backlash disproportionate. Critics rarely focus on ESG’s actual performance; while some ESG strategies have underperformed, so have countless non-ESG funds, including actively managed funds that charge high fees for benchmark returns. The selective targeting of ESG reveals its true purpose—to protect entrenched interests in industries like fossil fuels, resource extraction, and labor exploitation, which thrive on an economic model that privatizes profits and socializes environmental and social costs.
However, many experts argue that ESG is not fading—it is maturing.[3] Instead of being seen as a standalone theme, sustainability is increasingly being embedded across mainstream investment strategies. This shift reflects an evolution from ESG as a niche concern to ESG as a fundamental consideration in managing long-term risk and value creation.
Globally, ESG’s reception varies. In Europe, regulations like the EU’s Sustainable Finance Disclosure Regulation (SFDR) and consumer demand for sustainability keep ESG embedded in corporate strategies. In Asia, countries like Japan and Singapore advance ESG through green bonds and carbon markets. However, economic uncertainties—exacerbated by trade disruptions, rising energy costs, and geopolitical rivalries—have led some markets to prioritize immediate profitability over long-term sustainability. The climate crisis, with rising global temperatures and extreme weather events, demands a response that transcends political posturing. ESG remains a framework to address these externalities, ensuring that the costs of environmental degradation are not borne solely by taxpayers and communities.
ESG in the Era of Global Disorder
The concept of “global disorder” captures the complexity of the current moment: U.S.-imposed trade tariffs, shrinking global demand, and a shifting trade order. For Malaysia, an export-oriented nation, these disruptions pose significant risks. Yet Malaysian leaders insist the country’s ESG agenda is independent of U.S. influence, driven by the reality that profit-only models are obsolete. In Malaysia, despite net outflows over the last three years, ESG or Sustainable and Responsible Investment (SRI) funds, are rebounding, signaling renewed investor confidence.[4] Major institutions like Permodalan Nasional Berhad (PNB), KWAP, and Public Mutual continue integrating ESG into their strategies.[5] The Federation of Malaysian Manufacturers (FMM) has reaffirmed its commitment, stating that Malaysian industry will advance ESG regardless of U.S. political shifts.[6]
This disorder also presents opportunities. Malaysia can pivot from outdated export-led industrialization by cultivating a robust middle class with higher wages and purchasing power—aligning with ESG’s social and governance pillars. ASEAN, home to 680 million people, risks losing over 35% of its GDP to climate impacts without action. ESG offers a roadmap to stabilize supply chains, manage financial risks, and maintain competitiveness in a sustainability-driven world.
Malaysia’s ESG Commitment: A Model for Resilience
Malaysia’s proactive approach to ESG positions it as a potential leader in the Global South. The country’s mature oil and gas sector enables it to capitalize on carbon capture, utilization, and storage (CCUS). A landmark step was taken on 25 March 2025, when the CCUS Bill was passed by the upper house of the Malaysian parliament. This legislation provides a clear regulatory framework for large-scale CO₂ storage and utilization, enabling Malaysia to attract foreign investment from carbon-intensive economies like Japan and South Korea. The resulting revenue can support further decarbonization and extend CCUS accessibility to hard-to-abate industries such as cement and steel.
Malaysia has also introduced incentives to boost renewable energy (RE) adoption, alongside sustainable financing schemes for energy efficiency, CCUS, and transition finance. Transition finance is critical for high-emission industries like fossil fuel-based power plants, which remain essential for energy security. Financial institutions support clients in these sectors by providing time to transition, while expecting robust plans for adopting lower-carbon alternatives. The potential introduction of a carbon tax could further incentivize emission reductions and increase demand for carbon credits, embedding ESG principles into the economic framework.
These efforts are supported by partnerships with organizations like major Malaysian banks and corporations, demonstrating how ESG can be integrated into corporate strategies. The private sector’s role is pivotal, with up to 90% of the capital needed to achieve net-zero by 2050 coming from private sources. Financial institutions are guiding businesses toward sustainable practices and channeling capital into green solutions, underscoring Malaysia’s potential to reshape its economic structure.
Why Malaysian Businesses Must Persist
Abandoning ESG would be a grave misstep for Malaysian businesses. The global disorder—trade wars, climate impacts, and evolving consumer expectations—demands a shift toward sustainability. ESG is an act of accountability, ensuring businesses internalize the external costs of their operations. Traditional investments often fail to account for the damage they cause, perpetuating a cycle of harm that affects businesses’ bottom lines through rising costs and disrupted supply chains.
ESG enhances competitiveness. As global markets prioritize sustainability, companies that fail to adopt ESG principles risk losing access to supply chains, capital, and customers. Malaysia’s focus on biodiversity financing, carbon credits from forest conservation, and sustainable financing schemes positions it to attract international investment and meet growing demand for green solutions. Research in Malaysia suggests that ESG integration enhances resource efficiency, operational effectiveness, and helps firms address societal challenges.[7] Unlike earlier assumptions that ESG disclosure is merely reputational, findings now indicate that ESG creates real, tangible value for shareholders.[8] This aligns with stakeholder theory, which holds that firms managed ethically gain stronger market acceptance and higher public trust. Practical steps like energy efficiency and renewable energy adoption allow businesses to align with ESG without overwhelming costs.
The fight for ESG’s next phase will not be won in the U.S., where political headwinds are strongest, but in regions like Europe, Asia, and emerging markets like Malaysia. Stakeholders must reach out, organize, engage, and speak up to challenge the false narrative that ESG is a liability. By doing so, they can protect their long-term interests and contribute to a global shift toward sustainability.
The Real Story: ESG’s Lasting Impact
ESG’s greatest impact lies not in what it has failed to do, but in what it has revealed. The bulk of global investment still flows to harmful industries—protected by lobbying, inertia, and regulatory gaps. ESG has helped illuminate these distortions and offer an alternative model of investing that centres people and planet.
Malaysia’s commitment to carbon markets, CCUS, biodiversity conservation, and sustainable finance shows what’s possible when ESG is treated as an economic strategy, not just a moral stance. Its example can serve as a model for the Global South and beyond.
ESG Is Not Dead; It Is Undergoing a Reset
ESG is not dead—it is being recalibrated. Malaysia’s unshaken commitment to sustainability amid global uncertainty demonstrates that ESG is not a trend, but a necessity. By staying the course, Malaysian businesses can future-proof themselves, support national resilience, and lead the charge toward a more equitable and sustainable world.
- Ibid.
- Ibid.
