(Blog 2 of 4 in our series CR/RI at a Crossroads)
Corporate responsibility and responsible investment transformed the language and institutions of modern capitalism. Why hasn’t that translated into change at the scale that matters?
For more than half a century, the corporate responsibility (CR) and responsible investment (RI) movements have sought to reshape the role of business and finance in society. They have done so not by dismantling capitalism, but by attempting to reform it from within: redefining fiduciary duty, expanding the boundaries of corporate purpose, and embedding environmental and social considerations into the architecture of markets.
By many measures, they have succeeded.
And yet, by the measures that ultimately matter, they have not.
Global emissions continue to rise. Ecological pressures continue to intensify. Social inequality remains deeply entrenched. Capital markets, despite a proliferation of sustainability frameworks, commitments, and products, remain only partially aligned with the transition to a sustainable low-carbon economy.
This tension defines the current moment. The movements have changed the conversation. They have built real institutional infrastructure. But they have not yet changed outcomes at the scale or speed required.
Understanding why requires looking clearly at both what they built — and where their underlying theory of change has fallen short.
What Was Built
The most important achievement of the CR and RI movements is not any single policy, product, or initiative. It is the redefinition of what is considered legitimate in the first place.
Fifty years ago, the idea that corporations or investors bore responsibility for environmental or social outcomes beyond legal compliance was, at best, peripheral. Today, it is embedded, however unevenly, in mainstream discourse. Concepts such as stakeholder governance, stewardship, and sustainability risk are now standard features of boardroom and investment committee deliberations.
This normative shift has been accompanied by the construction of extensive institutional architecture and networks, e.g., the Sustainable Stock Exchanges Initiative.
A global system of sustainability disclosure has emerged, through frameworks such as TCFD, PRI, and, more recently, the ISSB. Companies now report on emissions, supply chains, and human capital in ways that were almost unimaginable two decades ago. In Europe, regulatory efforts such as the Corporate Sustainability Reporting Directive (CSRD) are embedding these disclosures into the formal requirements of markets.
Capital markets themselves have adapted. ESG integration, stewardship teams, and shareholder engagement are now standard practice among large asset managers. Financial innovation has produced new instruments, including green bonds, sustainability-linked loans, transition finance, designed to direct capital toward sustainability objectives.
Within firms, governance structures have evolved. Board committees oversee sustainability. Risk frameworks incorporate climate and social factors. Policies on human rights and supply chains have proliferated.
Taken together, these developments represent something real: a transformation in how capitalism understands its own responsibilities.
But they also reveal a deeper truth. Building infrastructure and changing norms is not the same as changing outcomes.
Where the Theory Breaks Down
The gap between ambition and reality is not accidental. It reflects the limits of the theory of change that underpinned the movements from the beginning.
At its core was a simple proposition: that better information, stronger norms, and voluntary action by companies and investors would, over time, redirect capital and corporate behavior toward more sustainable outcomes.
That proposition has proven only partially correct.
Voluntary action without consequence
The architecture of CR and RI remains, in large part, voluntary. Companies can make commitments without binding consequences for failing to meet them. Investors can signal ambition without fundamentally altering capital allocation.
The result is a widening gap between commitments and outcomes. The scale of pledges has grown exponentially; the trajectory of real-world environmental and social progress indicators has not.
Risk management is not system change
Within capital markets, ESG integration has largely been absorbed into existing corporate strategy and investment logics. It is primarily used to identify and manage financially material risks to companies and investment portfolios.
This is rational. But it is not transformative.
Managing climate risk within a portfolio is not the same as financing the transition to a low-carbon economy. One protects value; the other reallocates it. Conflating the two has led to a persistent overestimation of the field’s impact.
Misaligned incentives
The principal-agent structure of asset management reinforces this limitation. Portfolio managers are typically evaluated on short-term financial performance, not long-term system outcomes. Even when institutions make long-term commitments, the incentives that drive day-to-day decision-making often remain unchanged.
At a deeper level, capital markets continue to price many environmental and social externalities inadequately or not at all. As long as this remains true, market signals will not consistently reward transition-aligned behavior.
Greenwashing as a structural feature
The rise of greenwashing is often treated as a problem of bad actors or weak measurement. It is more accurately understood as a structural feature of the system.
When reputational benefits from sustainability claims exceed the costs of failing to deliver, over-claiming becomes rational. Disclosure and enforcement can reduce this imbalance, but they cannot eliminate it in a system where verification is difficult and incentives remain misaligned.
The unresolved question of fiduciary duty
One of the movement’s most consequential strategic choices was to assert that sustainability and fiduciary duty are aligned — that ESG integration enhances long-term financial performance.
This claim has been politically effective. It has enabled widespread adoption.
But it is only conditionally true. The empirical evidence is mixed, and the theoretical case depends on assumptions about time horizons, market efficiency, and the pricing of systemic risk that often do not hold in practice.
In reality, there are situations where fiduciary duty and sustainability impact diverge. Addressing those situations requires more than better data or voluntary commitments. It requires institutional and regulatory frameworks that explicitly manage that tension.
The Systemic Constraints
Beyond these internal limitations, the movements now face a set of external constraints that were underestimated in their early development.
Political vulnerability has emerged as a defining challenge. In the United States and elsewhere, ESG has become a focal point of political contestation. Legislative efforts to restrict ESG investing, challenges to investor coordination, and the withdrawal of major institutions from collective initiatives all signal a shift from elite consensus to active opposition.
This vulnerability reflects a strategic gap. The movements focused on influencing institutions but did not build sufficiently broad public coalitions to sustain the political support needed to drive and sustain the public policy reforms needed to support the transition to a sustainable low-carbon economy.
Regulation remains uneven and contested. The European Union has moved furthest in embedding sustainability into the rules of markets, but its efforts face implementation challenges and political resistance. In other jurisdictions, regulatory progress is slower and more fragmented. The result is a patchwork system that lacks global coherence.
The field remains geographically imbalanced. CR and RI have been shaped primarily by North American and European institutions. The priorities and perspectives of the Global South, where many of the most acute climate and development challenges are concentrated, remain underrepresented. This creates both effectiveness and legitimacy challenges for a movement that aspires to global impact.
What This Means
The picture that emerges is not one of failure, but of partial success — and of a theory of change that has reached its limits.
The CR and RI movements succeeded in redefining norms and building institutions. They made sustainability visible, measurable, and discussable within the core machinery of capitalism. That achievement should not be underestimated.
But they did not, and perhaps could not, deliver systemic change through voluntary action and market mechanisms alone.
The next phase will require something more difficult: the construction of political, regulatory, and accountability frameworks that align incentives with outcomes. It will require confronting trade-offs that the field has often sought to avoid: between short-term returns and long-term impact, between national interests and global equity, between market logic and public purpose.
It will also require a strategy that takes into account a new series of drivers from AI to deglobalization that are transforming the operating environment in which business, finance, and the CR and RI fields must now operate. In our next blog, we will explore the implications of some of these factors as we prepare for our May Symposium on the past, present, and future of the CR and RI fields. Don’t forget to give us your thoughts on where our conversation should focus by taking a moment to complete this short survey.