Environmental, social, and governance (ESG) and impact-driven investment firms and FinTechs are facing some unique political and economic headwinds in the US.
And yet, in Europe, Japan, and other regions, investors have never been more keen to invest in ESG funds and opportunities.
As our research demonstrates in this article, we look at 5 challenges and 5 ways this sector can compete effectively compared to non-ESG-based funds and financial institutions.
5 Challenges Impact-Driven Finance & FinTechs Face vs. BIG Finance
Here are some of the most important and time-sensitive challenges this sector faces right now.
- Lower brand awareness
It’s an encouraging headline that: “Global ESG assets surpassed $30 trillion in 2022 and are on track to surpass $40 trillion by 2030 — over 25% of projected $140 trillion assets under management”, according to the latest ESG report from Bloomberg Intelligence (BI).
However, that’s in the context of the top 500 asset management firms holding $128 trillion in AuM in the US alone. Non-ESG funds still outweigh ESG by a considerable margin.
According to Sustainability Magazine, BlackRock is one of the top ESG firms, with high-performing ESG funds But if we look at investment firms that are more specifically ESG-focused, like Parnassus, Federated Hermes, and Amundi, we’d have to admit that the brand awareness, and therefore, AuM inflows aren’t as strong as the BIG finance giants.
This is one of the challenges the ethical and impact-driven investment world faces. Being known more widely and using stronger brand awareness to bring more investors onboard can really level-up your performance. But it’s not always easy to know what it even means to strengthen brand awareness, let alone how to implement it. We can help you there.
- Claims of (and actual) “Greenwashing”
Claims of greenwashing are rife across the impact investing sector.
Unfortunately, not all of these claims are unfounded, and this gives Big Finance another stick to beat ESG finance with.
The true green agenda ⏤ the one that requires significant investment and action to push back against centuries of environmental and societal damage ⏤ is under siege.
So, if your firm is as good as your word then you need to make and validate your claims as often and as loudly as possible. We can also help you here.
- Does ESG generate a decent ROI vs. Big Finance?
Another challenge is the question of the ROI of ESG funds (like ETFs) and impact investing asset management firms.
The good news is that studies have proven that ESG funds perform just as well, if not better than non-ESG funds.
A huge meta-analysis of 2200 research papers showed that returns from sustainable investing are 60% higher than traditional, unsustainable investments (Fried et al, ESG and financial performance, Journal of Sustainable Finance & Investment, 2015).
Sustainable investments have higher aggregate ROI than oil, gas, weapons, and other harmful investments.
If you can show the strength of your funds or your sector through a benchmark comparison ⏤ especially if it’s done independently- it puts your firm in a really strong position.
- Re-alignment of investor priorities: ESG should be GCS (governance, climate, and social)
A recent survey by Stanford Graduate School of Business researchers, and the MSCI Sustainability Institute of 47 institutional investors with $250 billion AuM found that the main reason that investors put money into ESG funds is:
“Most see ESG primarily as a way of reducing volatility and risk in their portfolios — especially tail risk, the probability that a rare but catastrophic event could tank a company’s performance.”
The same survey also found that most investors think that ESG should be changed to cover “governance, climate, and social.”
Following on from this, the survey found that: “More than two-thirds of all respondents put governance factors at the top of the list, with environmental factors coming next and social factors barely registering at all.”
Governance refers to how well (or not) a company is managed, alongside its internal and external reputation. For investors, good governance is “table stakes”, and “If you’re a really bad actor, then it’s sort of over.”
The same goes for the environmental aspect of ESG. Data shows that primary concerns are around reducing a company’s carbon footprint):
“78% rank climate change or carbon emissions as the most important environmental factors they explicitly consider when making investment decisions; most say that they are analyzing the emissions associated with their investments, putting money into renewable energy and transition technologies, and quantifying the possible financial impacts of climate-related risk.”
Table 1: Top ESG factors explicitly considered by institutional investors
Table 2: What impact do you believe a commitment to integrating ESG criteria has on the performance of an investment?
Source for tables 1 and 2: A recent survey by Stanford Graduate School of Business researchers David Larcker, Amit Seru, and Brian Tayan, MBA ’03, conducted with assistance from the MSCI Sustainability Institute.
A finance Professor, Amit Seru, and co-director of the Corporate Governance Research Initiative, and senior fellow at the Hoover Institution says: “It appears investors are retreating to more traditional concepts of shareholder value creation and relying less on the stakeholder concepts that have come to epitomize ESG.”
Seru says: “ESG is likely to be quite different going forward from what it has been in the past, with investors focusing on the one or two main drivers of risk that have the potential to really drive stock price and influence outcomes.”
Investment firms in this sector need to be mindful of the changes in both working definitions and sentiments around ESG investing when it comes to brand and fund positioning.
For instance, focusing on tail risk reduction rather than the ethics of your fund might help to being in more capital and further your ability to make those ethical impacts.
Equally, the carbon reduction impact of your fund might be the best feature and benefit to put in the center of your messaging.
Weaving these insights into your overall strategy and multi-channel messaging looks likely to pay dividends into 2025.
- Current economic and political climate
This is an acute and serious issue in America in particular. Since the re-election of Donald Trump as president, and the resurgence of the right in the other branches of government, sentiment has turned against a lot of ESG-related initiatives.
Data from the ESG report by Bloomberg Intelligence (BI) shows: “The US may stagnate amid the presidential elections and ESG backlash.”
At the same time, as the BI study reports: “Europe is set to remain the most significant contributor [to growth]. Emerging themes and small, but expanding markets like Japan, Canada and Australia could also support gains.”
Growth in this sector is still forecast at 3.5% despite current headwinds.
It’s also reassuring that: “this study found that a majority of investors (85%) reported that ESG leads to better returns, resilient portfolios and enhanced fundamental analysis.”
Now, let’s look at the ways ESG and impact-driven firms can compete more effectively against big financial institutions.
5 Ways Impact-Driven FinTechs & ESG Investment Firms Can Compete Effectively Against Big Finance
- Create marketing and thought leadership content that engages your audience where it will reach them
Creating engaging content and distributing/promoting it to reach your audience is marketing 101.
The goal of marketing activities is to let investors know:
1) that you exist;
2) that you can solve their problems, and
3) that you are trustworthy, likable, and capable.
The trust element here is huge for ESG-based investment firms and funds because investors are considering putting a great deal of their capital, time, and energy into your offer.
How do you prove to them that your firm is trustworthy, is truly environmentally and ethically-focused, and can generate a strong ROI?
This has always been a significant marketing and communications challenge, but it is even more important in the impact-investing landscape.
We help solve those problems.
An example of how to market yourself well and establish a strong position as a thought leader in the impact-investing world is Generation (more about them below).
As you can see, they’re prolific with content publishing on LinkedIn, with articles and videos being published every working day. It’s clearly paying off, with high engagement rates and over 27,400 followers so far.
- Demonstrate your ESG credentials proudly
For investment firms in this sector, there are numerous ways you can accreditate and verify your ESG credentials.
In Europe, Article 8 and 9 funds can have their ESG credentials verified using the EU’s Sustainable Finance Disclosure Regulation.
Another way that banks and investment firms can demonstrate their ESG credentials is to become benchmarked in the S&P Global Sustainability Yearbook. The Yearbook compares 10,000 organizations’ ESG and Corporate Sustainability Assessment (CSA) criteria.
One Nordic banking giant, Nordea, takes sustainability very seriously. In 2025, they were recognised “among the top 15% of the world’s most sustainable banks. In 2024 Nordea’s Corporate Sustainability Assessment ESG score improved from 67 to 70.”
As they say: “At Nordea, sustainability remains at the core, influencing how we organise, operate and manage risks, in order to actively engage to drive the transition and capture growth opportunities. By integrating ESG factors into its risk management frameworks and internal due diligence processes, Nordea gains deeper insights into customer business environments.”
A look at their website, papers, commitments and accountable actions shows customers that Nordea is making great strides towards operating as a 100% sustainable bank, in every way, from the investments it makes to being net zero.
This is a great example of messaging and positioning for any bank or investment firm that’s serious about sustainability. Everything from the branding to the data-backed reports supports Nordea’s claims.
- Flex your ROI muscles
Here is just one of many examples of an ethical, ESG-focused fund outperforming a big finance industry benchmark fund (in this case, Liontrust UK Ethical Fund 2 vs. an MSCI UK fund):
Liontrust UK Ethical Fund 2 performance vs. MSCI UK fund performance
As we can see, the Liontrust UK Ethical Fund 2, with £418 AuM is outperforming an MSCI UK fund in every sector.
Liontrust is one of the leading ethical investment firms in the UK with £24.7bn AuM as of January 2025. Their investment philosophy is: “The way our economy is developing is not optimal and can be vastly improved by reducing the negative impacts on the environment and inequality in society.”
“We believe that development should be sustainable in that it meets the needs of the present generation without compromising the needs of future generations.”
Like other reputable investment firms in this space, Liontrust supports environmental and ethical credentials with data-backed reports that show, very clearly, what investors can expect from ESG investments compared to the alternatives.
As the saying goes, if you’ve got it, flaunt it. If investors are getting a better ROI from their investments than they’d get via non-ethical/ESG funds, then make sure to point this out.
We know this isn’t always easy to do because it often requires a deep-dive comparative analysis between your fund(s) and ones of comparable size, vintage, and other characteristics that make the comparison worth making.
This is something we can help you with.
- Showcase your ESG impacts
For consumers and investors, sustainable investing focuses on the triple bottom line of people, planet, and profit.
A huge meta-analysis of 2200 research papers showed that returns from sustainable investing are 60% higher than traditional, unsustainable investments (Fried et al, ESG and financial performance, Journal of Sustainable Finance & Investment, 2015).
The same study shows that 90% of sustainable investments are no worse than unsustainable. However, they do bring the bonus of their positive impact on people, the planet, and profit.
Nordea looked at the C02 savings from sustainable investing (vs. traditional investing), and found it to be 27X more impactful than making lifestyle changes.
If you’re an ESG-driven investment firm or an impact-driven bank or fintech in this space, this is a very powerful stat to get in front of potential investors and customers.
- Give your business an authentic voice, and make an impact with your humanity
Having an authentic voice and being human with your customers is crucial in this market.
It’s the most effective way to stand out compared to the big finance giants.
One firm that does an excellent job at this is Generation, a “pure-play sustainable investment manager”, with $35.6bn AuM, and a further $11.4bn of “of assets under supervision.”
Founded in 2004, “Generation has played a pioneering role in the development of sustainable and environmental, social and governance investing.”
“We seek to pursue our vision with urgency through our mission which is to deliver long-term, attractive, risk-adjusted investment returns and positive impact, and to advocate for the adoption of sustainable investing by the wider market.”
With Al Gore as Generation’s chairperson, the firm’s green credentials are firmly anchored. But it goes much deeper than that, with serious commitments backed up by the right messaging, reports, and videos across every comms channel.
Taking a similar approach, but in a tone of voice that’s authentically and unashamedly YOU (your team, firm, brand) is the approach you need to succeed in 2025.
We are working with some really exciting brands at present, and as soon as we’re able, we will be publishing case studies.
For now, take a closer look at our other case studies.
Key Takeaways: Uncommon Supporting Impact-Driven FinTechs & Financial Services
Despite some of the unique headwinds this sector is facing in the US, growth is expected to continue at a rate of 3.5% in 2025.
ESG finance investments come with numerous advantages:
- Businesses with good governance and carbon reduction initiatives reduce portfolio risk;
- Is 27X more impactful than lifestyle changes on the environment (e.g., carbon footprint reductions);
- Returns from sustainable investing are 60% higher than traditional, unsustainable investments.
Want a Free Tailored Sample & Marketing Analysis?
We want to support every type of ESG, impact-driven, ethical finance company that we can.
We’d also love to collaborate with more VC firms that support women entrepreneurs, climate initiatives, CleanTech, and startups and scaleups in those spaces.
So you can see what we can do, we are offering any company that signs up a free, no obligation:
- Marketing Analysis
- Tailored Sample
- 90-second explainer Loom
Are you ready to see how we can accelerate the growth of your business, and the positive impacts you can make?
Take a closer look at our case studies.