Research from TreasurySpring, the investment platform, along with the London Stock Exchange and Association of Corporate Treasurers, finds the number of organisations uninvested in institutional ESG products grew to 55% last year, up significantly on the 32% in 2023.
According to treasurers around the world polled for the survey, ESG’s influence on cash investment decisions has dropped from 63% in 2022 to 30% last year.
Nigel Owen, head of corporate origination at TreasurySpring, says the “fluctuating influence” of ESG has become a headline conversation as the survey reveals “retrenchment” but not “rejection”.
“Companies are moving beyond broad ambitions toward more focused, credible approaches, prioritising operational impact, investor alignment and measurable results.” He adds: “The challenge now is delivering on that commitment with the practical constraints of today’s world.”
The message that we’ve been trying to get across – generally, not just in ESG – is that this is the time to rely on your policies, not to come up with new ones and kick off with a knee-jerk reaction
According to Owen, business conversations that were once dominated by ESG have moved to ask whether ESG investment are being made for the “right reasons”.
This has caused more research and “digging” to see what lays behind the “ESG label” when it’s used. It is no coincidence that greenwashing, at 44%, remains the top investment risk factor for treasurers.
Investment patterns, Owen believes, are also being driven by a need to balance long-term ESG ambitions with “short-term financial and operational constraints”.
Owen says these constraints are caused by trade wars, geopolitical conflict and worries about inflationary pressures in the US and its impact on interest rates. “We’ve got all these different elements playing into these [decisions] at the moment.”
However, he argues this is not a time for treasurers to become impulsive. “Business can be very demanding of the treasury team at these times but the message that we’ve been trying to get across – generally, not just in ESG – is that this is the time to rely on your policies, not to come up with new ones and kick off with a knee-jerk reaction.”
TreasurySpring’s research shows that the most popular, and definable, destination for ESG-focused cash investments is money market funds at 27%, followed by green deposits, 21% and then green ETFs and green commercial paper, both at 16%. However, 34% of those polled picked the “other” category “suggesting diversification into alternative sustainable instruments or a lack of clarity in available offerings”.
TreasurySpring’s report says: “The ESG cash investment landscape remains fragmented, with a variety of competing options rather than a clear dominant product.”
ESG financing is no longer a checkbox exercise – it must be rooted in substance, strategy and measurable impact to stand the test of time
The investment results stand in contrast to what has happened in supply chains where ESG’s influence has risen from 35% in 2023 to 47% a year later, a shift driven by both regulatory and reputational pressure.
However, Owen says interest in ESG-related supply chains could change too if costs “ratchet up”.
Treasurers, Owen notes, “know there is value in ESG. It’s selling it to people who are looking at a bottom line.”
Meanwhile, green revolving credit facilities remain the most popular ESG financing form for treasurers, scoring 20%, while sustainability linked bonds score 17% and use of proceeds bonds on 16%. However, 53% of those questioned said they would not use ESG-compliant financing.
The report questions whether this could be a “permanent pullback”. However, it adds one thing is certain: “ESG financing is no longer a checkbox exercise – it must be rooted in substance, strategy and measurable impact to stand the test of time.”
Gavin Hinks is a freelance business and finance journalist