We may already have passed “peak ESG”. Environmental, social and governance (ESG) investing is the idea that investors should buy companies based not solely on their expectation of profit, but on their evaluation of whether the companies are acting responsibly for the environment, for society and in terms of corporate governance – that is, whether the benefits of commercial activities are likely to flow not just to the bottom line but to all who have a stake in the firm’s success.
That may sound to you reasonable, even worthy and noble, and if so you’ll be pleased to hear that the idea has long been “front and centre in the minds of executives, investors, regulators, business students, and even the public”, as Alex Edmans of the London Business School puts it in a recent paper,. Major corporations are appointing “chief sustainability officers” to the board, justifying strategic decisions based on their ESG impact, and tying executive pay to ESG metrics. A total of 4,375 investors managing $121trn had signed the Principles for Responsible Investment, a UN-supported network of
