Negativity around ‘ESG’ has been mounting, but investors are still backing sustainable solutions and continue to align their portfolios with a motivation to create a better future.
Michele Demers, CEO of Boundless Impact Research & Analytics, has been tracking these shifts and says it isn’t a political issue – it’s a data problem.
Here, Demers answers PA Future‘s questions on ESG outflows and asset managers rebranding funds.
We’re seeing investors back away from ESG-branded funds – but are they really pulling out of sustainable investments?
Not at all. The shift we’re seeing isn’t about abandoning sustainability – it’s about rebranding. Many investors, particularly in Europe, are still allocating capital to low-carbon, resource-efficient industries, but they’re distancing themselves from ESG labels to avoid regulatory scrutiny and political noise.
Pension funds, private equity and institutional investors are still looking for ways to manage climate risk and capture value in the energy transition – they just need better tools than traditional ESG ratings. That’s why we’re seeing increased investment in hard assets and verifiable impact rather than self-reported sustainability claims.
What areas of climate investment are seeing the most momentum?
Circular economy and materials innovation have become serious areas of focus – less hype, more infrastructure and tangible assets. Investors are backing direct carbon removal technologies, advanced materials and regenerative systems that reduce waste and increase resource efficiency. There’s a growing recognition that sustainability needs to be about industrial innovation, not just carbon credits.
We also see a significant push toward critical minerals and battery supply chain transparency. With increasing EU regulations on sourcing and life cycle emissions of key materials like lithium, nickel and cobalt, investors need to ensure supply chains are both legally compliant and financially viable. Transparency is now a risk-mitigation strategy – if companies can’t prove where their materials come from and what their carbon impact is, they become a liability.
What’s the biggest challenge for investors looking at sustainable assets right now?
Data integrity. Investors want real numbers – not vague commitments or marketing language. The biggest challenge is still getting verifiable, science-backed data on emissions, resource use and supply chain risks before committing capital.
That’s why we’re seeing more private equity firms and large asset managers shift toward Life Cycle Diligence (LCD), which combines Life Cycle Assessment (LCA) and Techno-Economic Analysis (TEA) to provide a clearer picture of both financial and environmental risk.
The bottom line? Sustainability investment in Europe isn’t slowing down – it’s evolving. The focus is shifting to supply chain transparency, circular materials and measurable impact. Investors aren’t looking for promises anymore; they’re looking for proof.
What areas of the circular economy are attracting the most investment right now?
There’s a lot of momentum behind material innovation and carbon and waste-to-value technologies in finding new ways to extend the life of materials and products. Investors are backing carbon capture technologies, low-impact industrial processes and regenerative approaches to manufacturing and agriculture.
One major focus is turning recovered metals into bio-based alternatives or industrial byproducts that can be repurposed. Instead of relying on traditional recycling models that often fall short, investors are looking at new business models that rethink how materials flow through the economy.
How are investors approaching transparency in critical minerals and battery supply chains?
With new EU and global regulations on emissions tracking, supply chain transparency has moved from optional to a financial and legal necessity. Investors now require full traceability of materials to ensure compliance and mitigate risk.
There’s a growing push for blockchain-based tracking systems and LCA-driven supplier audits to verify the origins of critical minerals like lithium, nickel and cobalt. Without this data, companies risk falling behind, losing funding or facing significant regulatory challenges. Investors are making it clear that companies won’t get funded if they can’t prove where their materials come from.
Why are some funds moving away from ESG branding while still investing in sustainable assets?
Many fund managers are adjusting their messaging, but their investment strategies remain focused on sustainable products, resource efficiency and resilient supply chains. The shift is largely about positioning – while the terminology is evolving, the commitment to funding low-carbon industries and infrastructure remains strong.
With increasing attention on regulatory compliance and long-term risk management, investors are prioritising climate resilience, industrial innovation and verifiable impact. The focus is on financial performance and stability in a changing market rather than adherence to any particular label.
