Ethically minded investors are growing more skeptical of ESG investing, wondering whether it actually furthers environmental or social justice aims. At the same time, demand for ethical investing is only going to increase as progressive millennials and Gen Zers accrue more financial assets, often by inheriting that money from their conservative parents.

If the long-anticipated SEC rules on ESG do not satisfy them, a prospect that seems increasingly likely as financial services industry groups push back on proposed disclosure rules, we should expect to see an ever-increasing appetite for alternate investment approaches. Even if the final SEC rules are strong, ESG can never completely starve industries like fossil fuels. As companies and funds dump their coal mines to bump up their ESG scores, for example, those mines just get bought up by private equity firms, resulting in money moving around but no fundamental changes. Consider: more than a third of all assets under management are now in socially responsible or ESG funds, yet global emissions continue to increase.

As Gen Z and millennials have more money to invest, I expect to see five trends accelerate as alternatives to traditional ESG investing:
Greater availability of non-market investments. As more investors conclude that publicly traded corporations can never be socially responsible, we will see growth of funds focused on “transformative investing,” an approach that seeks to build a more equitable economy that works for all, often called a “solidarity economy.” Expect to see a proliferation of non-market funds that provide loans to community-level businesses, especially in disinvested and marginalized communities of color, and provide returns on those loans to investors, albeit at a lower rate than market-based funds, perhaps modeled after current funds like the Ujima Capital Fund in Boston and the nationwide Seed Commons fund network.

More direct indexing options. Though direct indexing was created to let investors maximize their profits, it has enormous potential as a tool for ethical investing, allowing individuals to purchase a broad index and then subtract stocks of companies that do not meet their own values-based standards. Most of the large investment firms have recently begun to offer direct indexing to individual clients, and we should expect this offering to become accessible to a broader range of investors.

Pressure on companies for responsible retirement plans. Most investors only invest through their workplace retirement accounts, which they do not choose or control. We’ve seen an increase in pressure on large institutions as well as state pension systems to divest from harmful industries, most notably the campaign pushing Harvard to divest from fossil fuels, as well as increased pressure on companies to broaden their retirement fund options to include socially responsible funds. We can expect this pressure against states, institutions, and companies to increase as the climate crisis becomes more urgent, and we can expect more specific demands as investors increasingly realize that ESG alone is not good enough. Though experts disagree about whether divestment efforts actually make a difference, investors will still push to control where their own dollars are invested, even if only to help themselves sleep at night.

More activist investors. Many investors are concluding that the best way to force progress is to invest in the corporations whose practices they hope to change and exert pressure from the inside. Last year, small activist investors forced three new climate-focused directors onto Exxon’s board, and climate activists succeeded in getting Chevron’s shareholders to back a climate proposal in defiance of the executives’ recommendations. But it’s not just mom-and-pop investors pushing corporations to do better. Bloomberg’s Georgina McKay and David Stringer reported last week on a billionaire-led campaign in Australia to force one of the country’s largest polluters to shift its corporate strategy. We’re also seeing increased pressure from investors on the large investment firms who, through their proxy votes, control a huge portion of virtually every stock and generally refuse to use their votes to promote social or environmental initiatives even when claiming to support climate goals. Investors are feeling increasingly emboldened to take their frustrations directly to corporations and investment firms through shareholder activism, and we’re certain to see more guidance online to help would-be activist investors get involved.

More interest in philanthropy. Efforts to redistribute wealth are also certain to increase—including movements driving wealthy individuals to spend down their assets during their lifetime and those like “effective altruism” urging high earners to donate more money—all aimed toward giving more capital to those who currently have the least, and decreasing the power of the wealthiest few. Some researchers argue that donating is more effective than impact investing for driving change, and we can expect to see more investors using their investment earnings to fund philanthropic projects and simply opting to invest less in favor of greater giving.

Tanja Hester is the author of Wallet Activism and Work Optional, and host of the podcast Wallet Activism.