ESG investing has faced significant headwinds, with billions in outflows and a decline in new fund launches. U.S. ESG mutual-fund assets have experienced net investor selling since spring 2022, totaling $65.7 billion in outflows. This retreat is partly attributed to a backlash against "woke" policies and underperformance, particularly when energy prices surged due to the Russia-Ukraine war, impacting funds that avoid fossil fuels.

Despite the outflows, ESG funds' asset values have remained resilient, reaching $350.7 billion as of March 2026. This is due to overall U.S. stock market gains, which lifted cumulative returns to 34.9% in the same period. However, the number of new U.S. ESG fund launches plummeted from a 2021 peak of 116 to just nine in 2025, with a record 91 funds closing.

Proponents maintain that the core concerns driving ESG remain relevant and are now being addressed more discreetly. The pullback reflects a shift in investor sentiment and regulatory pressures, forcing a more subdued approach to environmental, social, and governance factors. For investors, this signals a need to reassess strategies that prioritize ESG, potentially favoring less public-facing or more integrated approaches.