The rise and fall of ESG: what it means for long-term retirement planning

Environmental, Social and Governance (ESG) investing has been one of the most discussed themes in financial services over the past decade, and its evolution matters for advisers focused on long-term retirement outcomes. What began as a niche approach has grown rapidly into a significant component of the global investment landscape. According to reports, ESG-focused institutional investment was on track to grow from roughly US$18.4 trillion in 2021 to an estimated US$33.9 trillion by 2026, accounting for more than a fifth of total assets under management.

For pension schemes, the initial appeal of ESG was straightforward: retirement planning is a long-term endeavour, and factors such as climate risk, labour practices and corporate governance have the potential to influence financial performance over extended horizons. Regulators and industry bodies increasingly expected trustees and providers to explain how ESG considerations were incorporated into governance frameworks, reflecting broader demands from members and stakeholders for responsible investment.

In recent years, the way ESG is discussed within the pensions and investment industry has evolved. While ESG-labelled strategies continue to form part of many portfolios, greater attention is now being paid to how sustainability claims are defined and evidenced. Regulatory bodies in several jurisdictions have responded to concerns about inconsistent disclosures by strengthening reporting expectations and emphasising transparency around ESG methodologies. This has contributed to a broader industry focus on clarity and consistency rather than headline labels alone.

Broader market volatility has also influenced how ESG is viewed within long-term investment discussions. ESG-aligned strategies have experienced periods of both relative strength and weakness, reflecting the fact that they remain subject to the same market forces as other investment approaches. As a result, industry commentary increasingly frames ESG integration as one of many considerations within overall governance and risk oversight, rather than as a distinct or standalone investment outcome.

For retirement planning, this reframing is significant. Long-term outcomes depend on resilience, diversification and disciplined governance factors that overlap with, but are not synonymous with, ESG labels. When ESG considerations are thoughtfully embedded into investment processes, they can contribute to these broader objectives; but they should not replace core principles of pension governance.

The rise and reassessment of ESG highlights a broader lesson: investment trends evolve, but sustainable retirement strategies are built on robust processes and clear communication. ESG continues to matter, but its role is now being defined not by popularity, but by relevance within sound, long-term investment practice.

Disclaimer

The content of this article is for general information purposes only and should not be construed as legal, financial or taxation advice. You should not rely on the information contained in this article as legal, financial or taxation advice. The content of this article is based on information currently available to us, and the current laws in force in the UK. The content does not take account of individual circumstances and may not reflect recent changes in the law since the date it was created. It is essential that detailed financial and tax advice should be sought (as well as legal advice where required) in both the UK and any jurisdiction where you are resident.

iPensions Group Limited is authorised and regulated by the Financial Conduct Authority, Licence Number 464521.