The new ESG: Energy, Security, Geopolitics (Part 1)

Six foundational settings of the global economy have just broken.

In March 2026, the Australian Prime Minister flew to Brunei to beg for fertiliser. He was there because a dozen insurers in London and Oslo closed a strait that carries a fifth of the world’s oil. I can’t recall a single meaningful conversation about it.

Nine months ago, I argued in the AICD’s Company Director that ESG was dead but sustainability would survive, reimagined as long-term value and resilience. It has happened faster than I expected. ESG is being reincarnated as something new: Energy, Security, Geopolitics.¹

This is the first instalment of a three-part series, which draws on work I am doing with partners Christopher Flynn and Ilona Millar at Gilbert + Tobin, and my discussions with Andrew Tiernan, who leads Hakluyt in Australia. BWD is building a resilience strategy purpose-built for boards whose risk registers no longer match the world they operate in.

I am writing in public to connect with board members and policymakers who will challenge me. You have seen things I have not. Your disagreement is more useful to me than your agreement.

If you think my work might benefit others, please pass it on. Read what is useful, ignore what is not, and write to me when I am wrong.

Part One: what has changed

On 20 January 2026, the Prime Minister of Canada told the World Economic Forum that the rules-based international order is dead. Mark Carney did not hedge, or suggest it was under strain, or in need of reform. He said it was over.

“We are in the midst of a rupture, not a transition,” he told Davos. “The beginning of a brutal reality where geopolitics among the great powers is not subject to any constraints.”

The diagnosis was familiar; the messenger was not. A sitting G7 leader, fresh from enraging the Trump administration by signing a strategic pact with Beijing, stood before global business elites and pronounced the American-led order dead.

Coalitions of the willing, Carney called them. The question for the boardroom is the same: willing to do what, and with whom? Six foundational settings of the global economy have shifted, regardless of when the Strait of Hormuz reopens.

1. Maritime chokepoints can be weaponised

Twenty per cent of global oil and a similar share of LNG move through the Strait of Hormuz. Alternative pipelines can reroute only three of the twenty million barrels that transit daily; the rest is stranded. Insurance, not drones, closed the strait. War-risk premia for Gulf transit jumped from 1% to up to 10% of hull value, and tanker traffic collapsed overnight. A dozen insurers paralysed a sea lane without firing a shot.

John Elkington, who coined the phrase triple-bottom-line, argues that insurance and reinsurance are now “the primary transmission mechanisms for both climate and geopolitical risk, doing the disciplinary work that voluntary disclosure was supposed to do.” A board that wants to know how the market is pricing its exposure should look at its insurance premia, not its sustainability report.

The Stimson Center, a think tank, calls this the new norm: a soft closure inflicts the same damage as a declared blockade when shipping insurance and congestion are weaponised. The same logic applies at Bab al-Mandeb, Suez, Malacca, and Panama. Any state or non-state actor with a grievance now knows how to exploit them.

Eli Groner, a former director-general of Benjamin Netanyahu’s office, was blunter. He called Iran’s demonstrated capability to close the strait “a victory far deeper and more strategic than any point-scoring military achievement.” His one-word summary: “Disaster.”

2. Food security is a chokepoint problem

Australia found out through fertiliser. The country has not produced urea domestically since Incitec Pivot closed Gibson Island in January 2023 over unaffordable gas. Around 60 per cent of Australia’s urea normally passes through the Strait of Hormuz.

Three emergency moves averted a total breakdown. Export Finance Australia used new strategic reserve powers under the EFIC Act to underwrite around 90,000 tonnes. Importers pivoted to Southeast Asian suppliers. Albanese flew to Brunei to secure cargoes free of export restrictions. The rescue was costly: by early May, the price of global urea had climbed to A$1,300 a tonne, and Australian agriculture will not meet even half of this year’s national need.

Perdaman’s plant in WA’s Burrup Peninsula opens in mid-2027 and will eventually meet about 70% of domestic demand. Until then, Australia remains exposed. Eight weeks from chokepoint closure to emergency government powers, with the Prime Minister flying to Brunei to beg for fertiliser. Most boards do not have this on their risk register.

3. The American energy guarantee is over

For five decades, global energy security rested on two assumptions: a US-led rules-based order, and American military supremacy underwriting freedom of navigation. The bargain was always odd. The United States, now the world’s largest oil and gas producer and a leading LNG exporter, policed an energy geography half a world away. It made sense as long as American interests aligned with global energy stability.

The Iran war is the most damaging event in a rupture that started earlier. Russia weaponised gas against Europe in 2022. China has weaponised rare earths and other critical minerals against Japan and broader supply chains since. Bordoff and O’Sullivan, writing in Foreign Affairs, call this “the return of the energy weapon.”

The reasons are structural. US shale has turned America into a net energy exporter, a major advantage in geostrategy. The Soviet threat that justified America’s military commitment to the Gulf has vanished, Gulf militaries are more capable, and the political and financial costs of CENTCOM have risen. The United States has every reason to leave, and fewer and fewer reasons to stay.

Washington will no longer underwrite the free passage of Middle Eastern fossil fuels.

4. The damage is physical, not financial.

The 1973 oil shock wiped out about 7% of global supply and was reversed within months through diplomacy. The Iran war has removed around 12% – the largest supply disruption in the history of the oil market – with up to 14 million barrels a day shut in and cumulative losses above 1 billion barrels. Brent has moved from under US$70 before the war to around US$95 in late May 2026.

This time the damage is physical. Refineries, pipelines, tanker routes and storage terminals are damaged, blockaded or stranded. The bottleneck is component manufacturing: cryogenic heat exchangers and air separation units that come from a handful of suppliers with three-to-four-year lead times. Damage to Gulf infrastructure is a five-year problem, not a five-month one. The damage cannot be restored by a phone call between capitals, and even after reconstruction the risk premium at every chokepoint will be permanently higher.

For boards, that turns any geopolitical exposure into a balance-sheet item: where you source, how it travels, and the political risk attached to both.

5. Coercion is the new default of economic statecraft

The US-built infrastructure of the global economy has become a battlefield: dollar clearing, SWIFT, semiconductor IP, the internet stack. For two decades, Washington alone weaponised these chokepoints to coerce adversaries and discipline allies.

China has built an apparatus to do the same. Its 2020 export control law and 2024 dual-use rules created the bureaucratic machinery to turn chokepoints into coercive instruments. The June 2025 US-China framework deal showed the shift in real time, as Washington rolled back semiconductor export controls in return for Beijing easing restrictions on rare-earth minerals that were crippling the US auto industry.

Beijing’s leverage is the ecosystem around critical minerals: extraction, processing, refining, manufacturing. Farrell and Newman argue in International Security that simply swapping suppliers fails because China dominates the system, not the minerals themselves. In 1973, OPEC provided roughly half of the world’s oil, whereas China’s share of clean energy supply chains today is 70 to 90%.

Former US Treasury Secretary Larry Summers warns of “a growing acceptance of fragmentation in the global economy, and maybe more troubling, a growing sense that ours may not be the best fragment to be associated with.”

The Chinese have learned from the Americans that economic coercion works. Anyone trading between them is exposed to both.

6. Neoliberalism is finished

Since the 1980s, neoliberalism has set the terms for markets, states and corporations: open trade, lighter regulation, and the free movement of capital, goods, people, and ideas. It delivered the cheapest consumer goods, the deepest capital markets, and the most integrated supply chains in history. It also concentrated wealth and hollowed out working-class communities across advanced economies.

Dani Rodrik (Project Syndicate) describes a post-neoliberal consensus forming across the political divide in the United States and other Western democracies.

First, concentrated corporate, financial and tech-sector power is increasingly seen as a problem for governments to address. Bernie Sanders and Steve Bannon agree on the diagnosis, even if their prescriptions differ.

Second, a good job has returned to the heart of the social contract. A job is identity, standing, and belonging, not just income. Neoliberalism treated worker dislocation as a transition cost and missed what work actually does. A parallel pressure comes from what Peter Turchin calls “elite over-production”: unprecedented numbers of university-educated citizens across the OECD, all with credentials that once implied status and security but now collide with shrinking opportunities. Voters are turning on the political class that traded job security for cheaper goods, and AI is now extending the threat to most white-collar professions.

Third, in Rodrik’s words, “industrial policy has moved from the disreputable fringe of economic discussion to its very centre.” Markets alone are no longer trusted to deliver resilience, national security or innovation.

The new order is state-led industrial competition. The United States, China and the EU are intervening directly in AI, semiconductors, critical minerals and the energy transition at a scale not seen since post-war reconstruction. The shift has reached Australia. “No one’s going to reward us for a final last stand for neo-Liberal politics,” Andrew Hastie told the ABC in March 2026, while the Albanese government’s Future Made in Australia commits tens of billions to onshoring critical industries.

Free-trade neoliberalism is dying. The state has moved from setting rules to picking winners, and most corporate strategies have not yet adjusted.

Change without principle

In his second inaugural address, Dwight Eisenhower warned that “change based on principle is progress. Constant change without principle becomes chaos.” The American liberal order, while uneven and hypocritical, was an extraordinary attempt to build principles into alliances, institutions, and rules about how states behave.

Today, we have change without those principles. Chokepoints have become weapons, tariffs have become bargaining chips, and the norms and institutions that mediated foreign relations have been trashed without replacement.

Boards do not get to choose whether this happens, only whether they see it in time. Part Two looks at what this means for your business, and what is likely to come next.

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¹ Christopher Flynn relayed this phrase in a recent conversation.

Luke Heilbuth is CEO of sustainability strategy consultancy BWD Strategic and a former Australian diplomat. Boards working through the implications of this break can reach him at luke.heilbuth@bwdstrategic.com.