Reality Prevails: ESG is Becoming Geopolitical, Financial and Industrial

In 2025, it’s becoming clearer than ever that an ESG strategy is not just window dressing, but has a real impact on businesses.

Facts prove that 2025 was the first year when environmental, social and governance (ESG) criteria became an integral part of organizational stability, with direct consequences on:

• the value of businesses;
• their resilience;
• their governance;
• their funding capacity.

We are not debating concepts any longer. This is the economic reality.

1. Businesses invest in ESG for its tangible results, not for appearances’ sake

During the first quarter of 2025, a massive 8.6 billion U.S. dollars withdrawal in ESG funds created a shockwave. Some were already predicting the “end of ESG.” However, this stock market decline only served to shed light on the fundamental difference between:

• superficial ESG, which is worthless in a now skeptical market;

and

• on-the-ground ESG, which leads to genuine outperformance.

There is a convergence of the meta-analyses from Oxford (Clark, Feiner and Viehs), Harvard Business School (Grewal and Serafeim, 2024) and MSCI (2025 Trends), with 88% of studies showing that rigorous management of material issues increases productivity and decreases volatility.

The market didn’t reject ESG. It rejected cosmetic ESG in favour of serious ESG, the kind that affects:

• the probability of an incident;
• business continuity;
• capital performance;
• insurability.

The year 2025 provided the necessary purge: killing superficial ESG so that strategic ESG can be born.

2. We see ESG becoming geopolitical and rewriting power relationships

Tectonic plates are shifting. The major ESG event of 2025 wasn’t financial. It was geopolitical.

United States

In the United States, ESG has become an ideological marker. Seventeen states have restricted its use in public funds (Harvard Law School Forum, 2025), while a federal court suspended parts of the Securities and Exchange Commission’s (SEC) climate regulations.

Europe

In Europe, the European Commission is currently proposing adjustments to the European Sustainability Reporting Standards (ESRS) under the Corporate Sustainability Reporting Directive (CSRD) to preserve its industrial competitiveness, delaying several sectoral obligations and easing the burden on more than 50,000 SMEs. The ambitions remain, but the war in Ukraine, rising energy costs and pressure from China have realigned the strategy. The transition will have to be compatible with industrial survival.

COP30

It’s the first time a worldwide transition has depended so much on a single geopolitical pole. Latin America, which hosted COP30, shook things up: mining sovereignty, climate justice and reallocation of investments.

Producing countries are demanding a share of the value and the rest of the world cannot simply ignore this. ESG in 2025 has become a vehicle for international influence.

3. The importance of risks linked to supply chains are getting recognition

In 2025, businesses realized that their greatest vulnerability wasn’t their local emissions, but rather the overall fragility of their supply chain.

The attacks in the Red Sea disrupted 12% of global trade (IMO, 2025).

Shipping container rates rose 350% (Drewry Index, 2025).

Logistical delays crippled industries dependent on critical materials, resulting in massive operational losses.

The World Economic Forum Global Risks Report 2025 now ranks supply chain risks among the five biggest threats of the decade.

For the first time, Scope 3 risks have become:

• financial;
• insurable;
• legal;
• critical to business continuity.

In Europe, the Corporate Sustainability Due Diligence Directive (CSDDD), adopted in 2024, has made supplier governance a legal requirement. Scope 3 is now a business risk, not a mere indicator in a report.

4. Standards are being rigorously adapted

In 2023, the International Sustainability Standards Board (ISSB) published its two first IFRS Sustainability Disclosure Standards (IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information and IFRS S2 Climate-related Disclosures) which became the cornerstone of global reporting and disclosures that are measurable, comparable, auditable and integral to the financial statements.

The European CSRD was adjusted, not as a backslide, but to ensure industrial viability. The transition must be rigorous, but it must also be manageable.

In Canada, the modernization of the Competition Act (Bill C-59) made greenwashing a major legal risk. The Competition Bureau now requires that any environmental claim be based on scientific testing, which represents a paradigm shift. It should be noted that, in 2023, Canada published its own Canadian Sustainability Disclosure Standards with a voluntary application date of 2025. The Canadian Sustainability Disclosure Standards were heavily inspired by the international ISSB standards.

Scientific literature supports this trend. A 2024 Harvard Business School report shows that investors now place more value on the quality of sustainable reporting than on the quantity of commitments.

5. Reinforced governance becomes a key component of risk management

The data in the OECD Corporate Governance Factbook 2025 is clear: 71% of ESG sanctions in 2024-2025 relate to poor governance.

The World Bank’s 2025 Report points out that businesses whose Board of Directors (BoD) has climate expertise are two to three times more likely to achieve their objectives.

The findings are clear. Governance is much more than the third letter in ESG. It’s the foundation for reliability, transparency, decision-making and value.

We’re entering an era where BoDs will become the guardians against systemic risks such as:

• climate risks;
• geopolitical risks;
• reputational risks;
• data integrity risks;
• supply chain risks;
• digital and AI-related risks.

Organizations that fail to restructure their governance will be unable to respect standards, secure financing and manage their risks.

6. Québec benefits from a strategic advantage

Québec is currently in a paradoxical position. The province has plentiful critical assets (hydroelectricity, low-carbon aluminium and strategic minerals), but has not yet adopted a structured approach to ESG.

The IEA anticipates a global surge in demand for critical minerals by 2030:

• +45% for copper;
• +60% for nickel;
• +600% for lithium.

These statistics redefine Québec’s strategic role in the transition.

However, several studies show that the majority of SMEs in Québec do not have a formal ESG strategy.

At Raymond Chabot Grant Thornton, we’re aware that ESG criteria have become an undeniable component of the tendering process in particular, driven by regulatory requirements and societal expectations. Furthermore, financial institutions now require an increasing amount of audited, structured and governed data.

Québec has a historic opportunity, as long as it doesn’t miss out.

Essential now more than ever

ESG is no longer an option. It’s a powerful strategy. In 2025, ESG is more than a concept. It’s a means of interpreting the global reality, a risk management framework and an instrument of competitiveness.

Organizations that grasp this will enter the 2026-2035 decade with a decisive edge while others will have to address risks that they’re unable to finance, transfer or control.

This article was written in collaboration with Stéphanie Fournier, Senior Director of Accounting Research, Risk Management, at Raymond Chabot Grant Thornton.