For years, ESG was hailed as the great breakthrough—the tool that would align capitalism with sustainability.
Environmental, Social, and Governance criteria promised to make finance more ethical, more conscious, and more aligned with the long-term well-being of people and the planet.
Asset managers embraced it. Companies rebranded around it. ESG funds ballooned into the trillions.
But today, the cracks are undeniable. ESG hasn’t transformed capitalism—it’s mostly helped capitalism adapt its image without changing its logic. For all the talk of responsibility and sustainability, the core system remains intact: extractive, short-term, and structurally blind to the deeper crises we face.
So what happened?
Why did ESG fail to deliver the transformation we hoped for?
The ESG movement emerged from a legitimate insight: non-financial risks—like environmental damage, labor practices, and corporate governance—affect financial performance. Investors needed better ways to evaluate companies in a changing world.
By incorporating ESG criteria into investment decisions, the idea was to:
It felt like a win-win: do good and do well.
ESG scores became a common language for responsible investing. Governments and regulators began to take notice. It seemed like the system was beginning to evolve.
But beneath the surface, a deeper problem was growing.
Different rating agencies use different methodologies, weighting, and definitions. The same company can receive an "A" from one ESG provider and a "D" from another. ESG became subjective, fragmented, and often incoherent.
Many companies view ESG as a reporting exercise, not a transformation strategy. They optimize for scores—not impact. The result is cosmetic change and the outsourcing of responsibility to ratings agencies and consultants.
ESG gave companies and investors a tool for reputational enhancement without addressing real sustainability. Funds marketed as “ESG” often contain fossil fuels, fast fashion, and exploitative supply chains—because ESG doesn’t necessarily mean ethical, just reportable.
There are few meaningful consequences for ESG failure. No built-in mechanism ensures alignment between ESG claims and real-world outcomes. This weakens trust and allows harmful behavior to persist under a new banner.
ESG is, ultimately, a financial tool. Its success is measured not in planetary health, but in risk-adjusted returns. And as long as markets prioritize profit above all else, ESG will bend toward that incentive.
The issue isn’t that ESG did nothing. The issue is that it did just enough to avoid real transformation.
Rather than shifting the logic of capitalism, ESG has largely been used to rebrand it.
It created a surface-level narrative of responsibility while preserving the same power structures, the same metrics, and the same time horizons that created the problem in the first place.
Worse, it lulled many into a false sense of progress.
At its heart, ESG was still anchored in the logic of financial materiality:
"How does this risk affect the company?"
Not:
"How does this company affect the world?"
This subtle but powerful inversion allowed companies to cherry-pick what they disclosed, reframe risk as virtue, and continue operating extractively while appearing progressive.
If ESG was working, why did emissions continue to rise? Why did biodiversity loss accelerate? Why did inequality deepen?
The answer: you can’t solve a systemic problem with a superficial patch.
Much like carbon markets, ESG relied on abstract metrics to communicate impact. But the metrics were:
There was no unified standard. No transparent verification. No real consequences.
It became a performance of responsibility, not a structure of accountability.
Rather than shifting capital flows away from extractive industries, ESG often rebranded them.
Fossil fuel companies were included in “sustainable” portfolios for having diversity initiatives.
Fast fashion brands were rewarded for recycling bins, while ignoring labor exploitation.
Tech giants were praised for climate pledges, despite fueling surveillance economies and political destabilization.
By folding harmful actors into the ESG fold, the system lost credibility—and worse, blurred the line between genuine transformation and strategic messaging.
It allowed stakeholders to say:
“We’re working on it,”
…without ever changing the fundamentals.
The world’s crises are systemic.
Climate breakdown is linked to economic inequality, resource extraction, social fragmentation, and political capture.
But ESG isn’t a systems framework. It’s an overlay—a rating system that tries to quantify morality through risk.
It doesn’t ask:
Instead, it asks:
And when entire industries learn to optimize for the score, the result is a self-reinforcing illusion of progress.
The failure of ESG is not just about flawed ratings. It’s about a failure of imagination.
We cannot transform capitalism by painting it green. We cannot build a regenerative future with a system that only sees value through the lens of capital risk.
At Harmoniq, we believe the next system must:
That’s why we’re building a new layer of value—anchored in verified contributions to ecological and social resilience, tracked transparently through the Civilization Management System (CMS) and rewarded through Resilience-Backed Assets (RBAs) and Sustainability Reporting Tokens (SRTs).
It’s time to shift from optimization to transformation.
From optics to outcomes.
From ESG to a contribution economy aligned with life.
Harmoniq believes in going beyond ESG to build systems that:
Our approach isn’t about optimizing within the current game.
It’s about changing the game itself—so that what’s rewarded in markets is what strengthens life, resilience, and long-term wellbeing.
We do this through mechanisms like:
ESG may have been the best we could do under old assumptions.
Now it’s time for the next step.
Navigate back to Post 1: The Great Carbon Mirage or the overview of the Carbon Market Blog Series.
