ESG: The Unsustainable Investment Opportunity…?

Corporate prowess in environmental, social and governance (ESG) has little or no merit as an indicator of superior economic returns. The evidence is considerable, pursuit of performance creates cost to the firm and is a constraint to investment opportunity. ESG measurement is critical but it must be designed to be and rooted in the economic benefit delivered. Superficial research that fails to answer the question ‘but financially speaking, so what?’ will only speak to the converted and do little to promote the cause. ESG measurement systems need to step up. Inconsistencies between the current crop of corporate indicators is obfuscating what is an already confusing picture. If ESG is to become embedded in corporate behaviour it needs to be managed with the same discipline and professionalism as deployed in other critical functions. Well-meaning advocates making fundamentally empty claims will not provide the heft that is required.