Debating ESG (Environmental, Social and Governance) is Just Plain Dumb

Do you know the buzzword for measuring a company’s commitment to ecological sustainability, the community and corporate governance? It’s ESG and it stands for “environmental, social and governance.” Andrew Ross Sorkin discusses this in his New York Times DealBook piece, “Can Good Corporate Citizenship Be Measured?” According to Sorkin, ESG has become the key metric of any investment decision and companies that are being considered need to prove that they are responsible in all three categories.

ESG got some attention recently because of a study by the Bank of America’s Merrill Lynch Global Research unit that measured investment results over a 10-year period since 2005.  According to study author Savita Subramanian, “I’ve never seen anything as effective as ESG characteristics when it comes to anticipating future earnings and volatility of U.S. corporations.”

However, there are those who might contest the connection between ESG and improved performance—but it’s a dumb debate. Those who don’t embrace ESG are in danger of following in the tracks of Uber, Volkswagen and Wells Fargo.

Andrew Faas is the author of From Bully to Bull’s-Eye: Move Your Organization Out of the Line of Fire

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