The Principles for Responsible Investment (PRI) turns 20 today, prompting me to reflect on how far responsible investment has come – and on how much remains to be done.
When the PRI was launched in 2006, the world looked very different. Global markets were strong, globalisation was accelerating, and systemic risk was often underappreciated. Responsible investment was still a niche concept, frequently seen as values-based rather than central to mainstream finance.
In many ways, you could argue that responsible investment emerged before we fully understood the scale of the risks it sought to address. Perhaps it was ahead of its time.
Twenty years on, we are operating in a far more complex environment. Today’s landscape is shaped by geopolitical fragmentation, inflation and energy shocks, accelerating climate and environmental impacts, rapid technological disruption from AI, social fragmentation, polarisation and rising cyber risk.
Responsible investment, of course, has never existed in a static world. Markets have always been shaped by disruption and crisis. What feels different now is the pace of change, the complexity of the risks, and the growing difficulty in articulating and defending the role that responsible investment plays in this rapidly changing landscape where, in some markets, shareholder rights are under pressure and stewardship is becoming more challenging.
And while the issues may be evolving, the underlying challenges have not gone away. If anything, they have intensified.
Going mainstream
Two decades on, ESG is both everywhere and nowhere. In some parts of the industry, the term is being quietly removed. In others, particularly in the US, it has become politically contested. Yet the risks that responsible investment was designed to address have never been more visible.
At its core, the proposition remains simple: environmental, social and governance factors matter because they shape long-term economic outcomes. Climate change, governance failures, labour practices and environmental degradation are not just externalities – they are forces that influence the stability and performance of the global economy.
By any measure, responsible investment has become mainstream. Thousands of institutions representing trillions of dollars now incorporate ESG considerations into their processes. And yet, responsible investment still seems to have continue to justify itself.
Over the past decade, ESG has evolved into an industry in its own right. Data providers have multiplied, ratings systems have proliferated and disclosure frameworks have expanded. While much of this development has been necessary, it has also introduced significant complexity and over-engineering.
While sentiment may be shifting, the underlying drivers of responsible investment have not diminished – they have strengthened
Investors are navigating hundreds of metrics, conflicting ratings and increasingly complex reporting regimes. The conversation has, at times, shifted away from strategic questions about long-term risk toward technical debates about data and disclosure.
At the same time, ESG may have been oversold. Expectations emerged that it would consistently outperform or rapidly drive corporate transformation. The reality has been more nuanced.
While sentiment may be shifting, the underlying drivers of responsible investment have not diminished – they have strengthened.
We are in a period of profound systemic change. Climate change is reshaping energy systems and economies. Biodiversity loss is emerging as a material risk across industries. Geopolitical tensions are disrupting trade and capital flows.
These are not abstract ethical concerns, but structural forces that will shape economic outcomes for decades.
For long-term asset owners – particularly pension funds – this perspective is unavoidable. As universal owners holding diversified portfolios across the global economy, they cannot diversify away from systemic risks, geopolitical instability or governance failures. The health of the economic system ultimately determines the health of their portfolios.
This was always the underlying logic of responsible investment. It was never simply about product labelling or portfolio tilts. It was about recognising that financial markets are embedded within environmental, social and governance systems – and that investors have a direct interest in the stability of those systems.
ESG backlash
Yet this is also a moment when parts of the investment community are becoming more cautious. ESG backlash, rising regulatory scrutiny and fear of litigation are, in some cases, leading to quieter voices and reduced ambition.
That would be a mistake. For long-term investors, stepping back or waiting for political cycles to turn is not a viable strategy – particularly when the risks being managed are long-term, systemic and intensifying.
As responsible investment enters its third decade, the focus needs to evolve. The first phase was centred on awareness raising and integrating ESG factors into investment analysis. The second built the data, ratings and disclosure infrastructure that now defines the field.
The next phase will be defined by a broader understanding of investor responsibility.
Large institutional investors are not simply market participants – they are among the largest owners of the global economy. With that ownership comes responsibility, not only for individual companies, but for the long-term functioning of the system itself.
This has practical implications. Responsible investment cannot be limited to avoiding difficult sectors. It must also support the transition of the real economy – through investment, stewardship and sustained engagement.
At the same time, investors cannot substitute for public policy. Capital can support economic transitions, but governments remain essential in creating the frameworks that enable them.
If the first 20 years of responsible investment were about awareness, integration and mainstreaming, the next 20 must be about effectiveness.
The backlash against ESG does not change the risks we face – it simply tests our resolve. Because this was never about labels or language, but about understanding how the world works and acting accordingly.
Long-term investors are not bystanders in this system – they must be its stewards. And stewardship, particularly in uncertain times, requires confidence, clarity and courage.
The question is not whether ESG remains fashionable, but whether we are prepared to lead – to act in the long-term interests of the people whose capital we manage, and the systems on which those returns depend.
Because this moment doesn’t call for less responsible investment. It calls for better – and bolder – responsible investment.
Fiona Reynolds was CEO of the Principles for Responsible Investment from 2013 to 2022.
