“Ethical Investing” to Profit-First: Aberdeen’s ESG Humble Pie

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It would not be too much of a stretch paraphrasing Samuel Johnson’s adage of the hangman’s noose ‘wonderfully concentrating’ the mind to fit the case of the investment fund manager: nothing brings about the latter’s wonderful concentration of mind as a combination of poor returns and the threat of legal suits.

In what reads like a parody, a lead article in the Telegraph this week cited the chairman of investment giant Aberdeen Sir Douglas Flint telling a conference that fund managers had made “ridiculously extravagant claims” about “saving the world” instead of focusing on profits.

“Our industry then made a kind of huge mistake, it became a marketing thing, let’s tell everyone we’re saving the world, we’re saving the planet…we’re not really about investing money, we’re just jolly good people and we’re saving the world”.

Sir Douglas noticed that not only did the “saving the world” mantra distract fund managers from their fiduciary duties of maximizing their clients’ returns, but it also exposed them to the threat of legal claims. He said that fund managers’ statements extolling “ESG” and “diversity” were now “in every search engine for a US litigation lawyer”, creating a potential “feast” for lawsuits.

If these observations are to pass as insightful comments by a seasoned denizen of the financial world, one might ask simply without seeming impertinent, “where have you been, Sir Douglas, for the past three years”?

When Businesses began going Woke

The roots of the ESG (Environmental, Social, Governance) movement can be traced to concerns about “corporate social responsibility” (CSR), a term coined in 1953 by American economist Howard Bowen. By the 1970s, CSR began to be popular among corporate circles and became part of mainstream management culture in the business world of the developed countries. In 1973, the World Economic Forum’s “Davos Manifesto” proclaimed that management must also serve employees as well as societies, as a "trustee of the material universe for future generations".

CSR transformed into ESG and “stakeholder capitalism” when the then-United Nation secretary-general Kofi Annan told a gathering of business and finance leaders at WEF’s Davos forum in 1999 to initiate, with the UN, “a global compact of shared values and principles, which will give a human face to the global market”. With Annan’s speech, ESG fused with the concept of “sustainable development” under the aegis of the Davos annual meetings and the UN. While the ‘ESG’ acronym covers a wide range of issues (such as “diversity, equity and inclusion”), concerns over the “climate crisis” became the focus of attention.

Since the mid‑2010s, ESG emerged as the investment world’s moral compass. No substantial asset manager dared neglect “sustainability”, that greatest of weasel words in the eco-zealot’s vocabulary. Larry Fink, chief executive of BlackRock -- the world’s largest asset manager with $11.6 trillion assets under management in first quarter 2025 -- said this in his annual letter to CEOs in early 2020:

“We believe that sustainability should be our new standard for investing…all investors—and particularly the millions of our clients who are saving for long-term goals like retirement—must seriously consider sustainability in their investments…I believe we are on the edge of a fundamental reshaping of finance.”

In the UK, among the loudest voices on the ESG bandwagon was Aberdeen—which changed its name to abrdn in 2021 before reversing earlier this year—whose advertising trumpeted ‘saving the planet’ and embedding ESG at the core of its portfolio strategy. For years, Aberdeen marketed itself as a leader in “sustainable finance”. It claimed that “ESG integration” was “critical to ensuring the world not only moves towards its net zero carbon emissions targets by 2050 but meets the 17 UN Sustainable Development Goals (SDGs).” The firm described sustainable investing as going “from niche outlier to core pillar of mainstream strategies,” asserting that embedding ESG across asset classes was necessary to combat climate change and uplift global prosperity.

The ESG Juggernaut Falters

As Sir Douglas’ abrupt candour reveals, Aberdeen’s full-throated moral branding – with ads depicting investors “doing well by doing good” and “fortune favouring the virtuous” – has not aged well. The past three years have been detrimental to the ESG cause. This has been a result of a combination of factors including the boomeranging impact of the Western sanctions on Russia which put a premium on energy security provided by fossil fuels, the collapse of “clean” energy stocks, and the widespread backlash against “woke capitalism” and climate change regulations particularly in the US.

Global ESG investment momentum has lagged since 2022. In 2022, for the first time in more than a decade, investors pulled more money from funds marketed as “sustainable” than they added. In the first half of 2024, the U.S. ESG market experienced net outflows of over $13 billion, on the heels of a $9 billion outflow in 2023.

Morningstar, a financial research firm, found nearly 2,500 fewer sustainable funds globally in 2023 relative to the prior year and 2024 was on track for an even steeper plunge. In its latest update, the firm reported that the global sustainable fund universe—composed of funds focused on “sustainability or environmental, social, and governance” factors—endured their worst quarter on record in the first quarter of 2025, registering net outflows of $8.6 billion. While Europe recorded its first quarter of net outflows, the US saw its 10th quarter of withdrawals.

The constellation of interests in the ESG juggernaut – the climate industrial complex composed of left-leaning governments, captured multilateral agencies such as the World Bank and the IMF, environmental NGOs and subsidy-seeking business corporations in the “renewables” sector – had primarily one major target in sight: the fossil fuel industries, namely coal, oil and natural gas. The urgency in ‘saving the planet’ meant rapidly shutting down the fossil fuels industry (“net zero by 2050”) with ESG and “stakeholder capitalism” leading the charge.

Unsurprisingly, the epicentre of the counter-revolution against “Woke Inc.” and the ESG fund-management evangelists emerged in the oil- and gas-producing, mainly Republican-run, states in the US. In 2022, the state of Texas published a list of financial firms that could have been banned from doing business with Texas, its state pension funds, and local governments. State leaders asserted that the ESG investment trend was an attack on fossil fuels the production of which made up a large portion of the state budget.

In early 2023, twenty-one US state attorneys general released a letter to the two largest proxy advisory firms that hold enormous leverage over institutional shareholders on how they vote on company resolutions across the country. The letter warned “Your actions may threaten the value of our States’ and citizens investments and pensions – interests that may not be subordinated to your social and environmental beliefs or those of your other clients.” The attorneys general objected to the use of ESG criteria in advice to state investment agencies. They provided evidence of possible violations of fiduciary duty, alleging that the proxy advisors potentially violated their legal and contractual duties to their clients.

By early 2024, ESG was becoming an increasingly “loathed monicker” as a Bloomberg article noted. In the same month, the New York Post led an article with the headline “Texas yanks $8.5B from Larry Fink’s BlackRock in ‘massive blow against the scam of ESG’”. And on the same day as the Post article, Executive Director of Consumers Research Will Hild tweeted that BlackRock "was simultaneously trying to destroy the domestic oil and gas industry while managing funds that depended on royalties derived from that very same industry. A more flagrant violation of fiduciary duty is difficult to imagine.”

Rather unsurprisingly, Larry Fink, hitherto chief priest of the ESG movement, rapidly cycled back on his early evangelism, stopped mentioning that “loathed monicker” in his annual letter to investors altogether, replacing the term with investment themes that focused more neutrally on “infrastructure” and “transition investing”.

Is Profit Such a Dirty Word?

The rise of populist parties in Austria, Italy, the Netherlands, Hungary, Poland, France, Germany and the UK -- invariably dubbed as the “far right” by the mainstream media – has yet to make its full impact felt in business circles in Europe and the UK. But even among climate-obsessed European and UK bureaucrats, widespread political pushback has put the brakes on Brussels’ onerous ESG agenda.

By early 2025, headlines such as “EU Mounts Major Retreat From ESG Agenda Amid Fierce Backlash” were unexceptional. The article by the Financial Post sporting the headline explained that the “European Union is about to walk back significant chunks of planned ESG regulations, amid a barrage of complaints that such rules are becoming a dead weight hampering EU efforts to compete with the US and Asia.”

So, in the scheme of things, Sir Douglas as Chairman of the Aberdeen Group is a bit late to the post-ESG party. No doubt this reflects the fact that the populist counter-revolution represented by the second Trump administration against the fads of ESG, DEI, climate alarmism and the globalist Net Zero agenda is still primarily a US-based phenomena.

Yes, he also misses the irony that it was his own countryman – a sage called Adam Smith – who famously expressed almost 250 years ago that he had “never known much good done by those who affected to trade for the public good.” And perhaps, in his public pronouncements, Sir Douglas also lacks the honesty of Smith’s most famous acolyte, Milton Friedman, who said over half a century ago that “the social responsibility of business is to increase its profits… so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud.”

A version of this article was first published in The Daily Sceptic https://dailysceptic.org/2025/07/04/aberdeens-ditching-of-esg-proves-the-green-finance-revolution-is-dead/