ESG Without The Label: How Markets Moved On

When Texas passed its 2021 anti-ESG law, it set off a wave of similar bills across the country. But beneath the politics, the markets kept moving, quietly proving that capital adapts faster than ideology.

It would be hard to find three letters that spark more debate in business today than ESG. Standing for Environmental, Social, and Governance, this term generally refers to how companies handle their impact on the world, their people, and how they are run.

But somewhere along the way, ESG lost its meaning. What started as a simple idea of doing business responsibly has turned into a political flashpoint. And while the arguments continue, the markets have already moved on, still applying ESG’s principles even as they leave the label behind.

The Domino Effect of ESG Policies

The Anti-ESG wave began in Texas in 2021, when lawmakers banned state contracts with firms that “boycott” fossil fuels. What started as a law to protect local oil jobs has now spread across the U.S., with more than 500 Anti-ESG bills proposed since 2025.

More than twenty states have pushed for similar rules or investigations targeting ESG practices.

• Anti-ESG: Texas, Florida, and North Carolina have led the charge with company blacklists that restrict state funds from doing business with firms viewed as hostile to oil and gas.

• Pro-ESG: States like California and Oregon have taken the opposite route, passing disclosure laws that require companies to report their emissions and assess climate-related financial risks.

The result is a “rapidly evolving regulatory landscape” that is creating industry-wide headaches and legal contradictions, according to Morgan Lewis’ Fall 2025 ESG Investing Updates.

For investors, these conflicting rules have turned ESG from a guiding framework into a political minefield. A fund that is required to disclose climate risks in California can be penalized for the same action in Texas. The debate is no longer about whether ESG is good or bad investing, but about who gets to define it.

Faced with this growing politicization, many industry stakeholders are adapting by simply avoiding the term altogether. Instead, they use different wording to describe their same risk-management and value-driven practices that are still rooted in ESG principles.

The Term That Lost Meaning

To understand how this shift is playing out across the industry, PitchBook conducted its 2025 Sustainable Investment Survey:

Among the responses, many expressed a desire to move away from the term, and not just those who oppose ESG.

It makes sense. The word no longer has a clear definition. For years, ESG was meant to bridge values and valuation, but it has become a greenwashed buzzword that simultaneously means everything and nothing.

How Did This Happen?

Much of this confusion comes from how ESG was originally marketed. It was never truly about sustainability, but rather a framework for measuring how environmental exposure, labor practices, and governance issues affect financial returns. Over time, it was rebranded as a symbol of corporate ethics, blurring its original purpose and making it an easy political target.

Yet, the market data demonstrates another story.

According to Wharton’s 2025 municipal bond study, investors still reward credible environmental and government information. Bonds with third-party ESG scores traded at yields three to four basis points lower, meaning they reduced borrowing costs even without using the ESG label.

In private markets, though, the label tells a different story. A Harvard Law Forum experiment found that startup founders were 5.7% less likely to choose an ESG-branded investor, and venture capital firms were 5.4% less likely to back an ESG-labeled startup.

That’s the irony. Capital still values the information, just not the name. The ESG label has become a reputation risk, while the data behind it has become a key factor in pricing and decision-making.

What Do The Markets Reveal?

Both supporters and critics of ESG now see the branding as baggage. Yet investors on both sides still invest in the same sectors of climate analytics, energy transition, and supply-chain transparency. The same metrics continue to guide how risk is priced, just without the symbolism that once made them aspirational. What began as a values movement has become a risk input.

The PitchBook’s 2025 sustainable investment survey highlights this at a scale. About 64% of total respondents said they still consider ESG factors when evaluating investments, and almost the same share of ‘anti-ESG practitioners’ admitted they have rejected deals for ESG-related reasons.

The figure below demonstrates the differences in non-practitioners and practitioners. On average, one in three investment professionals have turned down deals over governance risks, while 20% have for environmental risks.

Those who claim not to use ESG are still using it when it matters and is beneficial.

The political fight over ESG has only made it more invisible. Texas has pushed back against “woke” capital, and California has tried to legislate climate accountability, while markets have simply learned to switch between them.

Maybe that’s proof that markets always find a way to outlast their own politics. But it also raises a more important question: if markets can adapt this easily, what will it take for sustainability to truly matter in business again?

Find more articles from the Georgia Tech Venture Capital Club here:

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Lead Editor of The GTVC Publication: Sash Vijayakumar