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A basic but never-outdated question in sustainable finance is whether a company with strong environmental and social performance but weak business results can attract investors.
For more than a decade, concepts such as green finance, ESG (environmental, social, and governance) investing, and impact investing have been presented as milestones of modern capitalism—suggesting that capital flows pursue not only profits but also environmental and social values. However, a recent systematic overview by Schuster and Lueg (2026), based on 50 event studies, points to a different interpretation: capital markets operate primarily through the pricing of risk and return, not ethics.
A core finding is the difference between transition risk and physical risk. Policy and climate-related regulations trigger stronger and statistically meaningful responses than physical risks such as hurricanes or floods, which often show weak or insignificant results.
The study argues this is not about whether the risks are important, but about how markets process information. Transition risk tends to appear as clear information shocks that quickly change cash-flow expectations and the cost of capital. Physical risk is often more predictable and geographically dispersed, so it is absorbed into asset prices without causing sudden volatility.
The overview links these dynamics to the Efficient Market Hypothesis, which holds that asset prices reflect available information quickly and fully. It also highlights the role of information salience: when media amplifies a signal, market reactions can overshoot the actual economic impact.
In this framing, markets do not react to climate change as a moral issue. Instead, they react to the portion of climate change that can be translated into financial risk or profit opportunities.
The article notes that when ESG is promoted, media coverage can idealize sustainable capital flows as a moral reward for responsible corporate behavior. This can produce an “illusion of transition,” where sectors that can tell a green story receive priority over sectors that truly need change.
ESG is described as making sense when it has a direct effect on cash flow, the cost of capital, or risk levels—helping companies become financially and environmentally sustainable. But the piece cautions that this can be misunderstood: no ESG fund is willing to commit long-term capital to a company with weak cash flow and high risk, regardless of impressive environmental performance.
Profit is presented as a condition for survival. The article cites Peter Drucker’s analogy that profit is like oxygen for life—without it, sustainable existence is not possible. As a result, ESG, ESG investing, and green finance should be treated as an additional layer for assessing risk and long-term prospects, rather than an absolute moral command.
At the global level, the mismatch between demand and absorption is described as a key paradox. The Climate Policy Initiative estimates that to keep global temperature rise below 1.5°C, the world needs about $4.3 trillion per year through 2030, while current flows cover only roughly one-third of that amount.
The article also points to Vietnam as an example of similar dynamics on a smaller scale. According to the State Bank of Vietnam, green credit grew by more than 21% per year from 2017 to 2024, reaching around VND 704 trillion in Q1-2025. However, it remains a small share of total credit in the economy, with capital concentrating in sectors that are relatively easier to price, such as large-scale green agriculture and renewable energy.
On the capital-markets side, FiInRatings data cited in the article shows green, social, and sustainability bonds gaining traction, with nearly VND 6.9 trillion issued in 2024. Still, this represents about 1.5% of total new corporate-bond issuances, indicating the market is still nascent compared with traditional bonds.
In 2023, the Vietnam Chamber of Commerce and Industry (VCCI) reported that 65% of firms face difficulties accessing capital to carry out green projects. The article interprets these figures as evidence that cash does not automatically flow to the areas with the greatest demand, but rather to where risk can be priced and returns can be guaranteed.
The article argues that sustainable finance is often framed as moral commitment, but its real function is managing external risk rather than “doing good” in a moral sense.
It cites Hortense Bioy, head of sustainable research at Morningstar, who is described as noting that many people confuse sustainability with ethics. It also quotes Nicolai Tangen, CEO of Norges Bank Investment Management (managing assets worth over $1.6 trillion), saying: “ESG is not... doing good.”
The piece further notes that when ESG adoption is challenged politically in the United States, BlackRock CEO Larry Fink said the firm would stop using the ESG term. The article presents these statements as reinforcing the idea that ESG does not automatically create moral value—it matters when it affects cash flows, the cost of capital, or risk.
Overall, the article concludes that green finance has been expected to reorganize the economy toward sustainability, but both empirical evidence and market practice suggest a consistent result: green capital flows still operate within the logic of traditional finance.
If a company has strong environmental and social performance but weak business performance, investors are unlikely to allocate capital. In Vietnam, the article says ESG-related flows tend to favor sectors with competitive advantages and high standardization—such as coffee or pepper—where environmental factors can more easily translate into economic value. By contrast, riskier sectors with significant social importance, such as rice production or small-scale agriculture, still face capital-access challenges without risk-sharing mechanisms or supportive policies.
As presented in the article, green finance cannot replace public policy or solve all social problems. ESG matters when it directly affects cash flows, the cost of capital, or risk—supporting businesses that are sustainable both financially and environmentally. Companies seeking green capital, therefore, need to demonstrate that financial performance and sustainability can align, rather than relying on ethical commitments alone.
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