In a city as big as New York, there’s a club for everything.

A handful of people are strolling around a park on Manhattan’s west side. They’re with the New York University Impact Investing Alumni Club. Its monthly ESG walks are exactly what they sound like: NYU grads, walking and talking about ESG, aka environmental, social and governance investing.

“A lot of the acronyms that get thrown around, I’m like, what does that mean?” says 30-year-old Maya Robinson, a writer and editor who recently graduated with a master’s degree in French studies.

Robinson just started putting a little money in the stock market. “I think I’m just interested in learning about all forms of investing that I can and what can apply to me,” she says.

The more Robinson learns, the more she thinks what applies to her is putting money into companies that are proactive about climate change.

“It’s about the impacts that your spending or your investing is going to create on a social and tangible level,” she says.

ESG has been a buzzy topic in investing over the last handful of years. And ESG funds have become a more common option for investment portfolios, including retirement accounts.

But the bright light that was ESG seems to be dimming. This fall, for the first time, U.S. money managers closed more ESG funds than they opened.

Experts say some of this is a market correction after overdoing it. Regulators have also started scrutinizing the label. Plus, there’s been political pushback, with critics calling ESG activism that strays from pure bottom-line investment criteria. What does all this mean for ESG’s future?

Originally, socially responsible investing was about avoiding unsavory industries like tobacco. Now, it’s about thoughtfully choosing where to put your money.

Witold Henisz, who directs the ESG Initiative at the University of Pennsylvania’s Wharton School, said ESG started gaining traction in 2015, thanks to Larry Fink, the CEO of giant investment firm BlackRock.

“His annual letter to the companies in which he invests, which is basically every publicly traded company in the world, started shifting the tone and the subject of the letter,” Henisz said.

Fink started covering topics like climate and social change more intensely, and he increased the pressure every year. At the same time, climate activist Greta Thunberg and the Black Lives Matter movement were helping to spark interest in change. By 2021, ESG funds accounted for 10% of worldwide fund assets.

But in the rush to change the world, no one created rules about ESG. 

“We got a little ahead of ourselves,” said Henisz. “You know, we all wanted to believe we could get to the climate transition, we could effect societal change, it would be easy. It’s not easy.”

Because companies self-report their impact, it leaves room for greenwashing and other forms of deceit.

“ESG is a pretty amorphous concept,” said Aaron Yoon, a professor at Northwestern University who studies how to measure ESG. “Some people say that everything under heaven is ESG, right?”

A lot of things can play into ESG ratings: carbon emissions, oil spills, workplace diversity, employee turnover, child labor. That’s why it’s hard to measure, though plenty of financial data groups try. Bloomberg, S&P and Moody’s all put out ESG ratings. But how they rank companies is to a large extent subjective. And there isn’t really a way to fact check every claim a company makes.

“So we don’t even know whether they’re just making a promise or whether they’ve delivered,” Yoon said.

ESG or not, he added, this is kind of what investing is: making guesses on a company’s future performance. Still, we’re not talking about people doing their best to recycle. We’re talking about people making values-based decisions about where to put their money. 

Back at the ESG walk, the club is making its way along the Hudson River. Milica Škaro, a 29-year-old environmental lawyer, says she understands how murky ESG can be. But she thinks individual investors can influence how companies operate and hopefully make them more responsible.

“Sometimes it doesn’t seem like that,” she says. “But if that multiplies and becomes a huge movement, I’m certain that industries will change.”

In the ESG community, the hope is that the acronym moves beyond an investment category and becomes a rigorous reporting standard that’s federally regulated — that companies disclose their carbon emissions or board diversity right alongside their profits.