ESG is Dead – Long Live Sustainable Finance

• Karen Wendt
  CEO Eccos Impact, President of SwissFinTechLadies, President Sustainable-Finance
  Editor Sustainable Finance series with Springer-Nature

While ESG is still treated as a regulatory box-ticking exercise in many investment firms, a new consensus is quietly emerging: sustainability is no longer a marketing topic. It is becoming the core of modern risk analysis, innovation capability, and long-term value creation. For decades, the assumption that the future would develop similarly to the past formed the foundation of classical financial models. But this assumption is breaking down in a world of multiple crises, geopolitical fragmentation, technological disruption, and climatic instability. Those who manage portfolios today solely based on historical financial data are investing with a rear-view mirror.

This is precisely where Rosa Sangiorgio’s contribution, “The Role of Extra-Financial Data in Shaping a New Investment Landscape,” in the new Springer volume Sustainable Asset Management, comes in. Her central thesis is as simple as it is uncomfortable: financial data show where a company has been. Extra-financial data show where it is heading.

Do Not View Sustainability Data in Isolation

CO₂ exposure, labour rights risks, governance structures, or dependencies on nature are not moral categories. They are early indicators of future resilience, regulatory risks, innovation capacity, and ultimately share price development. The data already exist. The models do too. The real problem lies elsewhere: many investors still use ESG data as a checklist. But tick-the-box ESG will fail.

Those who view sustainability data in isolation, uncritically adopt standardised ratings, and do not integrate diverse data sources or machine learning approaches produce, at best, regulatory cosmetics – but no informational advantage. Sustainability only becomes relevant when it materially contributes to risk management and can genuinely help predict future developments. The next generation of sustainable investments will therefore not emerge against quantitative models but through their extension. ESG and extra-financial data cannot replace classical portfolio theories – but they can significantly improve them. This applies to Markowitz as much as to Black-Litterman or the well-known five-factor model by Fama and French. Reality is already moving towards a sixth factor: sustainability and transformation capability. This changes not only models but also the people who allocate capital.

The Financial World Faces a Paradigm Shift

Alongside the historic “Great Wealth Transfer,” the priorities of large fortunes are fundamentally shifting. Women worldwide are increasingly taking responsibility for capital – not only as investors but as strategic architects of intergenerational wealth. They are beginning to think like family offices: long-term, systemic, and intergenerational.

This is no longer solely about optimising individual returns. It is about the stability of family wealth over decades, societal resilience, and the question of what kind of world future generations will live in. Capital is thus increasingly understood as a force for shaping the future – not just as a trading instrument.

This development inevitably leads to a renaissance of impact investing. Yet honesty is needed here too. As Désirée Dosch explains in her chapter “Impact Investing: A Gender Lens View,” real impact primarily arises in private markets. That is where new capital is provided, where new technologies, infrastructure, energy, or healthcare solutions emerge.

On the stock market, by contrast, existing shares mostly just change hands. The secondary market does not initially create new assets or offer any immediate additional societal effect. This does not mean public markets are irrelevant – but it does mean that many narratives around “impact” in public markets need to be much more precisely managed.

Conclusion

The future of sustainable financial markets will therefore not be decided by simple ESG scores. It will be shaped by investors who intelligently combine data, understand systemic risks, and see sustainability as an innovation factor. Or, to put it more provocatively: the next generation of successful investors will not fail because they have too little data. They will fail because they consider the wrong data to be relevant.

With the publication of the new Springer volumes Sustainable Asset Management and Sustainable Wealth Management, a development long suppressed by the financial industry is coming to the fore: sustainable finance is no longer a niche topic for idealists or regulatory compliance departments. It is becoming the innovation engine of modern capital markets.