For years, ESG was treated as an optional extra—something you did for ratings agencies, awards, and glossy reports. That idea is quickly becoming outdated. In the United States, one of the big lessons of 2025 is that affordability itself is a core risk management and performance issue.
When customers, regulators, and investors are all watching how energy, housing, food, healthcare, and broadband remain affordable, ESG is no longer about optics. It’s about whether your business model is durable.
Affordability, equity, and climate are now colliding in ways that boards and executives can’t ignore. ESG isn’t a sidecar to strategy anymore; it increasingly “holds the data keys to the kingdom” by providing better intelligence on how companies manage transition risk, design pricing and investment strategies, and maintain trust with the communities they serve.
So here’s the uncomfortable question:
Is your business model making your customers’ affordability worse or better?
If a company’s decarbonization strategy or regulatory compliance plan drives costs in a way that makes essential services less affordable, that’s not just a social risk. It’s a governance failure and, in many sectors, a material business risk.
Where Affordability Lives Inside ESG
E – Environment: Who Pays for the Transition?
A serious ESG program forces you to quantify how your environmental choices show up on the customer bill or price tag.
That means tracking things like:
- Cost pass-through from capital investments
- Fuel and commodity risk
- How your decisions affect the customer “energy wallet” (total energy spending, not just the electric bill)
Only then can you answer basic questions:
- Is our strategy lowering our long-term cost structure?
- Or are we quietly raising customer costs and eroding their ability to participate in our products and services?
Without this information, you can be “greening” on paper while pricing people out in practice.
S – Social: Affordability as a Social Performance Metric
Affordability is not a soft, fuzzy concept. It’s a quantifiable social metric.
It shows up in:
- Energy or housing burden as a share of income
- Arrearages and disconnection/shutoff rates
- Customer churn and complaints
- Uptake of lower-cost, efficient, or “basic” offerings
These indicators give you hard data on whether your strategy is expanding or eroding affordability for the people who pay your bills. That’s central to both risk management and long-term growth.
G – Governance: Who Is Accountable for Affordability?
Governance is where affordability either becomes real—or disappears.
If governance doesn’t force management to ask:
“Are we increasing or reducing our customers’ total burden over time?”
then your business can easily optimize short-term returns while undermining long-term demand and political viability.
A strong ESG governance framework:
- Brings affordability metrics into board and committee dashboards
- Puts energy burden, arrears, and bill impacts next to capex, EBITDA, and risk reports
- Treats affordability signals the same way it treats cyber incidents or safety incidents: early data that something in the business model needs attention
If your ESG work doesn’t include clear affordability metrics, scenario analysis, and real engagement with affected communities, it’s time to update the playbook. The business model transition only works—politically, economically, and ethically—if it’s both low-carbon and livable for the people on the other end of the bill.
Why Energy Affordability Is a Material Issue
Energy is the engine of economic growth. When energy becomes too expensive, that engine starts to seize.
High electricity prices have linked economic and environmental downsides:
- They reduce industrial output, investment, and employment
- They erode real household incomes and increase energy poverty
- They act like a tax on economic activity that becomes macro-significant when energy costs spike
At the same time, the way we price electricity and structure business models has direct consequences for decarbonization.
- Research by Schittekatte and others shows that getting retail electricity rates “right” is crucial to affordable, cost-effective, economy-wide electrification—and thus to meeting climate goals.
- Huntington’s work suggests that a doubling of power prices could reduce electrification by 13–31%, a huge barrier to electrification-led decarbonization.
- Analysts at Resources for the Future explicitly link affordability to climate mitigation, noting that electrifying buildings and vehicles only happens at scale if electricity prices are low enough that households prefer electric technologies over fossil alternatives.
In other words, high electricity prices don’t just hurt your customers; they slow the transition you’re counting on to meet your climate targets.
A Different Lens: The “Energy Wallet”
Most conversations about affordability still focus on cents per kWh. That’s too narrow.
EPRI’s Energy Wallet concept offers a more realistic way to think about energy affordability. Instead of looking only at the electric bill, it adds up all of a household’s direct energy-related spending:
- Electricity and gas
- Other heating fuels (propane, fuel oil)
- Gasoline and diesel
- EV charging
- The amortized costs of equipment like furnaces, heat pumps, water heaters, vehicles, and residential solar
From this standpoint, one EPRI key finding jumps out:
Electricity bills are less than half of total household energy costs in every state.
When you look at the full Energy Wallet instead of just rates, a different story emerges:
- Electrification plus efficiency (EVs, heat pumps, better building envelopes) can reduce total household energy spending over time, even if electricity prices rise moderately.
- Households save because they spend much less on gasoline, fuel oil, and other fuels.
EPRI’s modeling suggests that, under plausible scenarios, the average U.S. Energy Wallet could decline by roughly 36–42% by 2050 due to electrification and efficiency. Outcomes will be regional, and some households will still need targeted support—but the direction of travel is clear:
If we get the design right, decarbonization can actually improve affordability.
Why ESG Now?
Policy and business design for the clean energy transition have to hit two targets at once:
- Keep electricity prices low enough to support electrification, and
- Keep the overall “energy wallet” affordable.
ESG management, integrated with traditional financial tools, gives you the framework to do this.
- If rates climb too high, households and businesses will underinvest in electrification. EVs, heat pumps, and other low-carbon technologies stay niche, and your climate targets drift out of reach.
- But even if per-kWh prices look “reasonable,” families are still in trouble if total spending on power, fuels, and equipment keeps rising.
Good policy and good governance don’t just decarbonize the grid; they rebalance costs so that people see their total energy burden go down over time, not up.
And in a market economy, who pays, when, and how isn’t a side issue. It’s central to whether capitalism actually works.
What This Means for Leaders
In practice, this points to a clear agenda:
- Rate design that sends efficient signals but doesn’t punish electrification
- Incentives and financing that help customers adopt efficiency and electrification technologies that lower their total Energy Wallet
- Products and protections that keep electricity competitively priced and accessible
- ESG governance that treats affordability as a core performance metric, not a footnote
Everyone uses electricity. Everyone has an energy wallet.
An ESG program, done properly, is essentially a feedback system that tells you whether your business model is making life easier or harder for your customers—including on affordability.
If you don’t know the answer to that question today, that’s your ESG to-do list. Contact Us if you want to discuss this topic more.