That's absolutely true. However, if you follow the ESG investment thread on RFD (or most places frankly), the whole ESG investment philosophy is very loosely defined with many ESG funds holding stocks of companies that would not be held in other ESG funds.
It's easy for someone to say that they don't want any oil and gas in their funds when oil and gas account for a small percentage of the market and that those stocks were performing poorly anyway. The story changes as oil and gas start accounting for a larger percentage of the market and when that sector may actually outperform the market. I'll bet many of those investors will be asking the question of why my fund is underperforming the market?
On a side note, according to various pundits, the vast majority of investment dollars in the 'fund' space is in passive index funds that invest in the market weighting of oil and gas. Only a very small percentage of investment dollars are in more actively managed funds with a small percentage of those active funds being ESG so the dollars we are talking about being removed by ESG is relatively small. Is it growing? Yes by the last accounts.