Environmental, Social and Governance (ESG) has moved far beyond being a trendy and hollow corporate buzzword. It is now becoming a core part of the global financial ecosystem, reshaping how value is created and escalated within every nook and corner of a business. Empirical studies in many countries have concluded that ESG contributes to the good performance of a company.
Multidisciplinary Digital Publishing Institute (MDPI), Basel-based pioneer in scholarly publishing, concluded in a recent study (Feb 2025) for 100 non-financial companies listed on the Saudi stock exchange that there was a significantly positive relationship between ESG disclosure and firm profitability, emphasizing the financial benefits of corporate transparency and sustainability. In India, it is mandatory for the top 1,000 companies to disclose ESG information in their annual reports since 2022. Firms adhering to solid ESG commitments boost investor trust, improve risk management, and increase operational efficiency.
At the end of June 2025, sustainable funds’ AUM reached a new absolute high of $3.92 trillion (+11.5% as of December 2024, and +14.3% year over year). This
growth in awareness and alignment reflects a convergence of maturity, regulatory clarity, and the rise of acting responsibly and ethically. However, given the changing narrative of the investor base, the precise future of ESG trajectory looks challenging.
Post-Covid related economic disruptions reignited the debate on key environmental and social issues. Firstly, a new generation of socially and environmentally savvy investors have started to bring sustainability related values directly into their investment process. Aided by the large and ongoing intergenerational wealth transfer from older generations to millennials, this is likely to transform sustainability-focused investing into the norm.
Secondly, political and institutional attitudes towards ESG are fast tracking attention. ESG reporting is a specific requirement for companies listed on stock exchanges around the world including Nasdaq, Shanghai, Hong Kong, and FTSE. In Singapore, the International Financial Reporting Standard (“IFRS”) Sustainability Disclosure Standards are being incorporated by the local exchange with a 5-year rollout announced in August 2025. The European Union’s Sustainable Finance Action Plan aims to reorient capital flows towards sustainable investments.
Many Asia Pacific governments and regulators are moving decisively on sustainability, setting bold targets and reshaping policy, with markets responding in turn. Smart cities, circular models, unlocking green capital, and decarbonizing energy aren’t just environmental imperatives but have comprehensive economic connotations. These endeavors with sustainability standards are becoming a critical part of the finance industry’s ecosystem.
The strengthening of operations through ESG practices enhances the worth, reputation and performance of a company. Companies embracing ESG philosophy are financially strong, with investable securities that are committed to making the world a better place, while also generating healthy returns for the shareholders. Nvidia, a MSCI ESG rating of AAA, is testimony of the phenomenal growth. Nvidia dreamt big to create a future aiming to bring superhuman capabilities to every human, in every industry. But more intellectual intensity means much more goodwill. It means more sustainability, more innovation, more inclusivity, more humanity, more impact, and above all more prosperity for all. That’s a future that all can celebrate. The champions of ESG are poised to have more access to finance and increased efficiency. The companies that support these ESG initiatives can overcome competitive obstacles thus enduring sustainability and resilience over the long term.
Recent cascades of crises viz kinetic and non-kinetic wars, sputtering growth, escalating climate emergency and a decline in global cooperation have disrupted the fine fabrics of the world economic order. ESG has not been spared, either. Many companies are backing away as the adherence and restrictions are too constraining and prescriptive. It is killing the margins.
Furthermore, the cost of compliance and reporting are adding to the numbers of companies. From an industry perspective, ESG disclosures still lack a universally global framework, leading to inconsistent data. Rating agencies in different countries use varied methodologies, making it difficult for investors to assess the true sustainability performance. In some instances, companies have self-reported ESG data without independent verification.
Not in a too remote past, there has been political climb down on ESG obligations. In June 2025, it was reported that the European Commission was planning to withdraw its proposal for an EU Green Claims Directive, which aims to combat so-called greenwashing and increase the transparency of environmental claims. The implementation deadline for Member States and the application deadlines for the already adopted and enacted EU Supply Chain Directive (CSDDD or CS3D) has also been postponed. Despite progress, challenges remain.
ESG is no longer alien to the world. It is expected to become the rails of a new financial system. For investors seeking to construct portfolios that generate alpha, some ESG strategies may generate excess returns when compared to conventional investment strategies, especially for long-term investors, and provide downside protection during economic or social crisis. ESG notion is still fragmented. Regulatory ESG standards vary by jurisdiction. A holistic approach is required for collaboration between different geographies and industries.
Sources:
- https://www.mdpi.com/2071-1050/17/7/2977
- https://www.taylorwessing.com/en/insights-and-events/insights/2025/07/kommt-die-
esg-klagewelle
This article was authored by Dave Seebaluck, Portfolio Manager of Griffin Growth Fund. The general investment objective of the Fund is to achieve medium-to-long-term capital appreciation through direct and indirect investments globally, in both developed and emerging markets. The Fund may invest in multiple asset classes and may employ hybrid strategies including investing in both public and private companies.
Swiss-Asia has hosted Griffin Growth Fund on its award-winning fund management platform for over 4 years. The Fund benefits from best-in-class back-office support and robust governance frameworks, enabling the Portfolio Manager to focus on investment decisions while Swiss-Asia handles the complexities of operational upkeep, investor onboarding, and regulatory compliance.
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Swiss-Asia’s client-centric approach and commitment to ESG integration underscore our commitment to building relationships with managers and investors which are marked by trust, transparency, and expertise.