Two decades in, ESG investing has gone from buzzword to boardroom essential—reshaping risk, returns, and responsibility—so time to take stock, our eight lessons to be learned and our deep dive this week.

Richard Nixon’s famous words ‘Let us move from the era of confrontation to the era of negotiation’ couldn’t be more appropriate, even after 56 years: As 2025 progresses, the global economy remains in a delicate equilibrium. The Eurozone began the year with stronger-than-expected growth, driven by Southern Europe and a pre-tariff export boost—though this momentum may prove short-lived. In the US, early signs of tariff strain are emerging, with Q1 GDP dipping despite solid consumer and investment activity. Rising inventory costs and shifting supply chain strategies reflect the growing impact of trade frictions, while a surge in large corporate insolvencies, particularly in Western Europe and North America, signals mounting pressure. With inflation easing, the ECB is likely to cut rates by September, while the Fed is expected to hold steady until clearer signs of slowdown emerge. All of these questions are analyzed in this week’s What to watch section.

Eight lessons learned from 20 years of ESG investing

Our complete deep-dive for you here.

1. ESG investing is the answer to a double tragedy. Global systemic risks such as climate change are particularly challenging to address because they embody two intertwined dilemmas: a tragedy of the commons and a tragedy of the horizon. ESG investing has emerged as a mechanism for bridging the gap between short-term pressures and these long-term sustainability imperatives.

2. A bet on change. ESG metrics as a risk and analytical tool provide an essential lens through which to navigate the investment landscape, focusing on avoiding idiosyncratic risks today while anticipating long-term systemic risks and opportunities tomorrow. Rather than assuming a continuation of the status quo, they enable investors and institutions to manage change and drive innovation.

3. Moving from hype to mainstream. Investor attitudes towards sustainable investing have evolved from early hype to more sober resilience, reflecting the classic Gartner Hype Cycle framework. Indeed, the performance of ESG investments has been quite volatile over the past 15 years, mostly for the same reasons as non-ESG portfolios. But overall, ESG funds have proven resilient, continuing to see inflows and sustained growth. This shift towards more stable assets shows that sustainable investing has matured, not disappeared.

4. Europe dominates ESG investing. The extent to which ESG investing is prominent in portfolios varies widely by region. Europe is by far the leader – supportive regulations and strong investor demand have driven sustainable investing into the mainstream. European funds have a much higher proportion of ESG assets as a percentage of total assets under management than any other region – around a fifth, compared with low single-digit percentages in the US or emerging markets.

5. ESG investing is intelligent risk management. Beyond regional differences, a growing number of investors share a common motivation: they continue to view ESG considerations as a form of prudent risk management that offers strategic foresight. ESG does not guarantee success. But it does provide investors with a structural toolkit to seek, identify and analyze risks and opportunities beyond what can be deduced strictly from quarterly reports.

6. A complement to traditional financial analysis. Analysis that incorporates ESG considerations works best as a complement – not a substitute – for traditional financial analysis. The metrics are designed to complement, not replace, fundamentals such as earnings and cash flow. They can highlight risks or opportunities that a pure numbers view might miss. Used properly, they can lead to smarter strategic decisions while preserving core financial fundamentals.

7. A fiduciary duty. Investors‘ fiduciary duty is increasingly intertwined with prudent ESG-based risk management. By incorporating ESG factors, asset owners and managers are constantly rethinking how they can continue to thrive in an era that looks increasingly different from the past. This refines their pursuit of long-term returns and forces them to balance client demand for ESG with their fiduciary duty, recognizing that ignoring material ESG factors may itself mean failing their clients.

8. ESG investing matters for insurance. The insurance sector offers a powerful case study of why ESG cannot be ignored. As climate disasters intensify, insurers face rising claims: 2024 was the fifth consecutive year that insured costs from natural catastrophes worldwide exceeded USD100bn. Major insurers, particularly in Europe, have responded by committing to net-zero targets for both their underwriting and investment portfolios to reduce long-term risks. Such forward-looking moves are not just about keeping losses manageable; they also build valuable intangibles such as brand reputation, intellectual property, and stakeholder trust.

Our complete deep-dive for you here.

What to Watch this week

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• Eurozone: Robust growth before tariffs bite. The Eurozone economy started 2025 with strong growth momentum (+0.4% q/q), surpassing expectations due to robust performances in Spain, Ireland, and Italy while core Europe lagged behind. Germany showed a modest recovery (+0.2% q/q) driven by consumer spending and investment, in contrast to France's sluggish growth affected by reduced consumer and government spending. Overall Eurozone growth was supported by rising exports, particularly to the US ahead of anticipated tariff hikes. As challenges still loom amid trade restrictions and the US recession, we continue to expect subdued Eurozone growth of +0.8% in 2025. With inflation cooling further, we maintain our view of the ECB cutting its policy rate below neutral to 1.5% by September.

• US: Tariff-damage increasingly visible, but the Fed will wait out the storm. Q1 GDP dropped slightly (-0.3% q/q annualized), mainly due to a pre-tariff surge in imports (41% q/q annualized). Underlying domestic demand remained solid, with the consumer (+1.8%) frontloading purchases ahead of the tariffs as well as firms for industrial supplies (business investment +9.4%). But data at US ports indicate that inbound shipments started to fall in April as spending started to weaken. Moreover, US households are as gloomy as during the 2022 inflation spike and businesses are reporting falling capex plans. The US is expected to flirt with a recession over Q3-Q4 2025. With inflationary pressures rising, the Fed will remain on hold next week. We expect the Fed to (cautiously) start the easing cycle in October.

• Inventories: It is costly to stockpile your way out of a trade war. We estimate that the average cost of inventory for main consumer industries in the US varies between 2 to 3 months of turnover, offering them a buffer to hedge against short-term swings in demand. While certain sectors are benefiting from strong demand and seizing the moment to build buffer stocks (i.e., defense, transport equipment), others are retrenching because they fear either a profitability squeeze or have already high inventories (e.g., appliances, auto, textiles) or are simply unwilling to stockpile (e.g., pharma, telecom). To mitigate the impact of tariffs, firms are increasingly turning to storage facilities in free-trade zones and bonded warehouses as a way to defer entry taxes rather than stockpiling. The rise of the vacancy rate of storage solutions (8.5%, +330bps y/y) suggests limited interest for reshoring.

• More than one large bankruptcy per day since the beginning of the year. 122 companies with turnover of EUR50mn or more filed for insolvency in Q1 2025. This is a record high since 2015. Western Europe continues contribute the most (+10 cases y/y to 74) while the US leads when it comes to the size of insolvent companies, accounting for 8 out of the top 20 insolvencies in Q1 2025. Overall, services and retail were hit the hardest, particularly in Western Europe and North America, followed by construction in Western Europe and Asia. The trade war and structural shifts could push 2025 to set a new record for large insolvencies, raising risks of a domino effect on suppliers and subcontractors.

You will find the full set of stories here.