The numbers appear stark at first glance. ESG-designated funds recorded a net outflow of $935 million in January 2026 alone, marking the fourteenth consecutive month of negative flows, according to a May 2026 analysis from Harvard Law School's Forum on Corporate Governance. The number of ESG-labeled funds has contracted by roughly 100 since January 2025. Yet the U.S. SIF Foundation's 2025/2026 Trends Report indicates that $6.6 trillion in U.S. assets under management is still explicitly marketed as ESG or sustainability-focused. The political and regulatory environment has forced a visible recalibration of language, strategy, and disclosure practice across the industry, but three advisors who work with values-driven investors say the obituary for ESG is premature.
Jeffrey Gitterman, managing director at Perigon Wealth Management, has spent more than 25 years building a practice rooted in climate-aware investing. He draws a sharp distinction between where values-based investing is thriving and where it has genuinely stalled. At the top of the wealth spectrum, particularly among family office clients, demand for impact-aligned portfolios has never wavered. The decline, in his view, is concentrated among high-net-worth and mass-affluent clients, where advisors play a more central role in shaping investment decisions—and where regulatory and political scrutiny of ESG service providers has introduced real professional risk. "The perceived risk is too large for advisors to promote this kind of investing, and therefore often will err on the side of caution," Gitterman said. He sees near-term opportunity in infrastructure tied to climate risk, energy security, and domestic onshoring, pointing to the electricity and water demands generated by AI data center buildouts as a structural driver of long-term investment in sustainable infrastructure.
Jim Worden, chief investment officer at The Wealth Consulting Group, rejects the fad narrative entirely. In his view, the market went through a greenwashing problem similar to what the industry is now navigating with AI-washing: real underlying principles inflated by opportunistic marketing, followed by a necessary correction. "The premise of ESG investing makes sense for the long-term—that better governance, more inclusion of stakeholders, and better transparency about long-term environmental impact is good for society," Worden said. The current AI and data center buildout is driving demand for energy and power infrastructure, and many companies classified under ESG frameworks are participating in that buildout—not because investors are demanding ESG, but because of where those companies sit in the energy supply chain. The U.S. SIF's 2025/2026 Trends Report supports his longer-term optimism: nearly 70% of sustainable investing respondents said they remain committed to sustainability's long-term future, even amid the current political headwinds. Worden also sees technology—including autonomous vehicles and AI-driven efficiency gains—as net positive forces for ESG-aligned outcomes over a longer time horizon.
Jay Winston, associate wealth manager at Coldstream Wealth Management, offers the most optimistic read of the three. In his view, the retreat of the ESG label has produced an unexpected benefit: the investor base that remains is more sophisticated, more committed, and better served by more rigorous analytical tools than at any previous point in the industry's history. "Regardless of whether or not the federal government currently supports and promotes companies embarking on environmental or social impact initiatives at their companies, many firms are continuing to do so based on internally driven principles," Winston said. He points to a telling data point: approximately 90% of S&P 500 companies now release ESG reports, according to sustainability reporting data compiled by Vena Solutions in 2025, underscoring how deeply sustainability disclosure has become embedded in corporate practice. Meanwhile, 84% of S&P 500 companies now identify climate change as a financial risk, up from 67% in 2021, according to the same data set. "We may see fewer funds explicitly carrying the ESG classification, but they have been replaced with more sustainable, long-term values-focused portfolios which depend less on buzz-word hype and more on active evaluation of holdings through the lens of sustainability," Winston said.
The evolution of ESG mirrors broader shifts in the wealth management industry, where systems-level investing is gaining traction and firms are hiring impact investing veterans to meet client demand. The label may be retreating, but the underlying investment philosophy, these advisors argue, is not.
