ESG Ebb and AI Wave: Governance Concerns Behind the Shift in Global Business Trends

From ESG to AI: A "Turncoat" Global Business Narrative

In 2023, when the International Financial Reporting Standards Foundation (IFRS) released the first batch of sustainability disclosure standards, European financial regulators launched the Corporate Sustainability Reporting Directive (CSRD), the U.S. Securities and Exchange Commission (SEC) proposed climate risk disclosure rules, and California along with other Democratic-led states followed with legislation, the global business community was once convinced: ESG (Environmental, Social, and Governance) reporting would become as standard for companies as financial reporting. Firms rushed to set up sustainability teams, voluntarily issued reports, and the Big Four accounting firms even established dedicated departments to bet on this blue ocean.

Yet just three years later, the business climate in 2026 is starkly different. Forbes contributor Jon McGowan recently pointed out in a sharp commentary: "AI is replacing sustainability as the latest business trend." Starting with the rightward shift in global elections in 2024, the Greens' seats shrank in the European Parliament, Trump returned to power in the U.S. and pushed Congress to repeal multiple ESG rules, and foreign institutions withdrew from ESG teams. Voluntary ESG reports from large enterprises for fiscal year 2025 have been suspended. Both the Big Four accounting firms and the financial software platform Workiva have quietly set AI as the focus of their annual conferences—the 2024 Amplify conference was still dominated by ESG, while in 2026 it is barely mentioned.

McGowan likens this shift to "fair-weather fans" in sports: they swarm when the team is winning and turn to a new favorite when it loses. The "hardcore fans" of ESG—environmental activists—still hold their ground, but most "bandwagoners" have jumped into the AI frenzy.

The Ironic Cycle: AI's Energy Backlash and Climate Goals

More paradoxically, AI itself is a "behemoth" of energy and water consumption. It is estimated that training a single large language model consumes electricity equivalent to that of hundreds of households for a year, while data centers require staggering amounts of cooling water. Just as companies revel in the AI narrative, climate scientists warn that if AI deployment goes unchecked, the global net-zero path will become unattainable. The article mentions that U.S. Democratic Senator Elizabeth Warren has already begun pushing for AI transparency obligations similar to the ESG disclosure framework—proposing that companies be required to report AI's energy consumption and environmental impact. In 2023, McGowan himself wrote an article hinting that the ESG framework could be used to regulate AI.

This practice of "robbing Peter to pay Paul" is not only myopic on the part of individual companies but also reflects the institutional fragility of global climate governance. When electoral cycles replace long-term agreements as the driving force of policy, the continuity of sustainable development goals is easily shattered.

International Justice on a Slow Burn: Can Legal Pathways Rebuild the Bottom Line?

Faced with a retreat at the administrative and legislative levels, environmental advocates are pinning their hopes on the judicial system.Faced with the regression at the administrative and legislative levels, environmental advocates have pinned their hopes on the judicial system. In 2025, the International Court of Justice (ICJ) issued an advisory opinion on states' climate change obligations, injecting legal "teeth" into the Paris Agreement. Subsequently, the UN General Assembly reinforced the authority of that opinion through a vote. Based on this, lawsuits have begun to be filed in courts against major greenhouse gas-emitting companies and oil and gas firms. It is expected that in the next step, environmental groups may challenge the EU's reduction of CSRD requirements before the European Court of Justice (ECJ) or the European Court of Human Rights (ECtHR), arguing that it violates commitments under the Paris Agreement. Looking at past rulings, the ECJ and ECtHR have occasionally issued decisions in favor of environmental rights, but the judicial process is extremely slow, and participation is limited to legal professionals—unable to achieve a rapid shift like regulation or markets.

Long-term Impacts from a Global Development Perspective

From a global development perspective, the ebb of ESG has a particularly significant impact on developing countries. Small and medium-sized economies had hoped to attract green investment and improve governance transparency through international sustainability standards, but now the fragmentation of standards and political volatility have narrowed that channel. At the same time, the energy demands of the AI industry may further widen the electricity gap between developed countries and the Global South, with green power allocation increasingly tilted toward AI data centers, squeezing out the renewable energy share that should have been used for climate adaptation and livelihood development.

It is worth noting that "die-hard fans" are not acting alone. In the 2026 Republican primary for Florida governor, ESG and climate change were no longer central issues; instead, controversy over "AI data centers" took center stage—candidates vied to express opposition to AI facility construction. This may signal that when the physical costs of AI (land occupation, electricity consumption, water usage) begin to directly impact voters' lives, public attention may shift back to sustainable constraints. But whether this awakening can translate into systemic governance reform remains uncertain.

Conclusion: Trend or Cycle?

The ebb of ESG is not a failure of its philosophy, but rather the pendulum swing of global governance between short-term business cycles and long-term sustainability. Just as real estate markets always rebound after a crash, the sustainable development movement has experienced multiple "hibernations" in history. However, this time the difference is that the alternative—AI—is not only not a climate solution, but may instead become a "Trojan horse" that exacerbates resource consumption. When "weather fans" realize that the new trend also faces regulatory and resource constraints, the road back may be even more difficult.

For development analysts and policymakers, the real challenge is not to chase whichever "latest trend," but to build a more resilient institutional immune system between political cycles, technological waves, and ecological bottom lines.