ESG vs. Anti-ESG in Early 2025: A Reflective Perspective on Shifting Tides

Mengdi Zhang

After years of consistent inflows, the abrupt withdrawal of USD 8.6 billion from sustainable funds caught my attention when I initially reviewed Morningstar's Q1 2025 statistics (Morningstar, 2025, p. 1). My reaction was moderate scepticism, on the basis of how ESG once seemed a relentless trend. And more fundamental questions of corporate ethics are at stake: what Crane and Matten (2019) call “the study of business situations where the issues of right and wrong are addressed”.

 

The moral issue becomes pronounced when considering the recent surge of anti-ESG products. Strive Asset Management launched a direct-indexing service in late 2024 that clearly rejects environmental, social, or governance criteria (Strive Asset Management, 2024, p. 2). I was conflicted when I read about this position: whilst a “profits-first” approach aligns with classical shareholder primacy, I also wondered if overlooking societal or environmental impacts might, in De George’s (1987, p. 204) words, compromise the “justification of economic systems” through neglection of moral considerations.

 

My concern intensified upon learning about the "anti-woke" ETF from Azoria Partners (New ‘anti-woke’ ETF, 2024, p. 1). The objective is to "penalise" firms who implement DEI (diversity, equality, inclusion) policies, beginning with Starbucks. Some consider this to be a legitimate strategy to circumvent perceived political ambitions. Yet from a stakeholder’s point of view, might it in fact alienate employees and customers who expect more inclusive workplace practices (Brunk, 2010)? Upon contemplating these discrepancies, I noticed that the outflows from ESG funds – $1.2 billion US in Europe and $6.1 billion US in the US (Morningstar, 2025, p. 1) – arere not merely a matter of chasing short-term yield; they indicate a cultural and ethical recoil that opposes the entire principle of socially responsible investing.

Historically, many thought that "green" or "sustainable" finance would continue to ascend. A detailed examination uncovers several influencing factors: the global economic recession, increasing interest rates, and shifting political agendas. Morningstar (2025, p. 3) explicitly cites Donald Trump’s anti-climate policy in the United States as a factor undermining some sustainability goals. My initial reaction was one of frustration: how could the position of a single government undermine something that appeared morally sound? Moral issues, especially in business, are seldom shielded from political influences.

 

This realisation induced me to assess the intricacies of a truly “ethical” investment approach. Crane and Matten (2019) note that ethics frequently necessitates the navigation of conflicting principles. Certain anti-ESG investors assert they are combating “political correctness,” contending that an emphasis on carbon footprints or worker diversity undermines corporate profitability. On the contrary, ESG advocates claim that disregarding environmental and social externalities is by its very nature irresponsible, leading to costs imposed on society in the future. I am beginning to believe that both parties may be oversimplifying the situation. Minimising injury to ecosystems and communities is ethically appealing; however, economic institutions are also apprehensive about "greenwashing" or superficial compliance. Simultaneously, anti-ESG voices risk overlooking long-term sustainability obligations.

 

Faced with these divergent angles, I ponder whether the $3.16 trillion in US ESG funds (Morningstar, 2025, p. 4) still signifies a considerable influence, despite the withdrawals in the first quarter. The fundamental inquiry may be the extent to which either faction, ESG or anti-ESG, is prepared to scrutinise the ethical foundations of its stance. De George (1987) reminds us that ethical analysis is inseparable from economic realities. Similar to how "profit at all costs" may disregard social detriment, "green at all costs" could jeopardise genuine business sustainability. The challenge is in reconciling these frequently conflicting demands.

 

Upon reflection, I observe that the recent outflows do not inherently signify the demise of ESG. It is more likely the case that they indicate a time of reckoning, pushing ESG fund managers to exhibit tangible benefits instead of depending on a marketing halo. Meanwhile, it shall become necessary for anti-ESG strategists to rationalise exclusion of social or environmental standards as being apparently ethically correct or financially beneficial overall. Upon reflection, I propose that the ESG vs. anti-ESG debate constitutes more than just a passing trend: it is, in fact, a moral crossroads that prompts one to query whether capital markets can balance the wellbeing of individuals, businesses, and society as a whole.

 

Reference list

 

Brunk, K. H. (2010). Exploring origins of ethical company/brand perceptions—A consumer perspective of corporate ethics. Journal of business research, 63(3), 255-262.

 

Crane, A., Matten, D., Glozer, S., & Spence, L. J. (2019). Business ethics: Managing corporate citizenship and sustainability in the age of globalization. Oxford university press.

 

De George, R. T. (1987). The status of business ethics: Past and future. Journal of Business ethics, 6, 201-211.

 

Morningstar. (2025). Global sustainable fund flows: Q1 2025 in review (pp. 1–4). Morningstar.

 

Financial Times. (2024, December 5). New “anti-woke” ETF makes Starbucks its first target (pp. 1–2). Financial Times.

 

Financial Times. (2024, November 29). Strive Asset Management expands into anti-ESG direct indexing (pp. 2–3). Financial Times.