Warned but not killed.
Quite simply, the isolation provided by one of these transformers does not depend on whether or not there there is an earthed wire nearby. It works the same as balanced line audio, which does not need a screened cable to work (over short distances, yes, I've done it, using a moving coil microphone over about twenty feet of twin flex with no perceptible hum) but a screened cable will always be used in real life to minimise the common-mode electrostatic hum picked up. The screen doesn't affect the balance.