Many are expecting ESG to turn the trajectory of our social and environmental challenges around. But I appreciate your warning to temper our optimism. Fortunately, we’re in the relatively early stages of redefining the role of business, so we still have an opportunity to shape it. I do believe that an ESG strategy tied to Purpose has greater hope of creating meaningful impact on all stakeholders. As you’ve shown, ESG simply isn’t enough, especially as it is currently conceived.
Thank you so much Sara for this piece and rick, I think this is your hook for a chronicle of philanthropy article. it’s also a way to challenge secularism in a friendly way via allied contacts
As you aptly note about the mirage of the S in ESG, though ESG investing has shifted investor attention to the concept of sustainability, the reality is that there is no correlation between ESG ratings and sustainability. The ESG index was invented by MCSI as a financial investment index in 2001. It has become an investor frenzy because of Larry Fink’s annual letters to the shareholders of Black Rock, and the read by the world of investors.
ESG ratings assess how stable a company is by assessing how aware they are of environmental, social and governance issues. A company can do egregious damage to the environment and society, and still have a AAA rating, as you note, not just for S, but also E + G, if they have policies and procedures in place to handle potential volatility to the stock price that might result from a catastrophic event, like an oil spill, or the public awareness of corporate malfeasance, like Meta’s issues with privacy and mental health.
Funds into ESG rated companies will continue to grow at mock speed because these metrics are asking corporate leaders to lead more conscientiously. Good business. Good returns for investors. Investors who are confused by false labels, like the association of ESG ratings and sustainability, are opting for returns over intent.
The option here, is to take responsibility. The investment houses are in business to provide the greatest gains to investors, and themselves in so doing.
Investors interested in making the world a better place will need to ask a lot more questions, do a lot more reading and listening, a lot less shopping and flying, and no more auto-pilot investing in ESG funds.
COMMENTS
BY Charla Vall
ON February 28, 2022 12:25 PM
Many are expecting ESG to turn the trajectory of our social and environmental challenges around. But I appreciate your warning to temper our optimism. Fortunately, we’re in the relatively early stages of redefining the role of business, so we still have an opportunity to shape it. I do believe that an ESG strategy tied to Purpose has greater hope of creating meaningful impact on all stakeholders. As you’ve shown, ESG simply isn’t enough, especially as it is currently conceived.
BY Donna Eleanor Schaper
ON March 3, 2022 06:45 AM
Thank you so much Sara for this piece and rick, I think this is your hook for a chronicle of philanthropy article. it’s also a way to challenge secularism in a friendly way via allied contacts
BY Alison Curry
ON March 7, 2022 11:56 AM
Great Article! AAA
As you aptly note about the mirage of the S in ESG, though ESG investing has shifted investor attention to the concept of sustainability, the reality is that there is no correlation between ESG ratings and sustainability. The ESG index was invented by MCSI as a financial investment index in 2001. It has become an investor frenzy because of Larry Fink’s annual letters to the shareholders of Black Rock, and the read by the world of investors.
ESG ratings assess how stable a company is by assessing how aware they are of environmental, social and governance issues. A company can do egregious damage to the environment and society, and still have a AAA rating, as you note, not just for S, but also E + G, if they have policies and procedures in place to handle potential volatility to the stock price that might result from a catastrophic event, like an oil spill, or the public awareness of corporate malfeasance, like Meta’s issues with privacy and mental health.
Funds into ESG rated companies will continue to grow at mock speed because these metrics are asking corporate leaders to lead more conscientiously. Good business. Good returns for investors. Investors who are confused by false labels, like the association of ESG ratings and sustainability, are opting for returns over intent.
The option here, is to take responsibility. The investment houses are in business to provide the greatest gains to investors, and themselves in so doing.
Investors interested in making the world a better place will need to ask a lot more questions, do a lot more reading and listening, a lot less shopping and flying, and no more auto-pilot investing in ESG funds.