Earlier this year, Larry Fink, CEO of BlackRock, the world’s largest asset management company, declared he would no longer be using the term ESG because it had been politically ‘weaponised’. Prior to this announcement, Environmental, Social and Governance standards – ESG for short – had become popular shorthand for a range of ethical/responsible business practices. Fink himself had previously pioneered ESG standards as a risk framework for investors, although its usage has subsequently spread well beyond the investment arena. Following Fink’s proclamation, some market commentators have questioned whether ESG as an umbrella term for ‘good’ business has had its day. Writing in the New York Post, Phillip Pilkington noted that in a survey of recent debuts funds by new asset management firms, 56% had relabelled their products ‘thematic’ rather than ‘ESG’. So, should business more broadly be jumping ship and looking for another label for their good works? And how should business schools like ours respond to this apparent shift in focus? WHAT IS ESG (REALLY)? The idea of selective investment based on criteria other than pure financial reward is not new. As far back as the 1950s and 60s, pension funds – some of the largest systematic investors in the financial markets – recognised the potential to affect wider social and environmental issues through their investment decisions. ESG standards are thus only the latest framework for evaluating investment risk and leveraging investment decisions for good. The term ESG came to popularity via a 2004 report titled Who Cares Wins, a joint initiative of financial institutions at the invitation of the United Nations. In the 20 years since, the ESG movement has grown into a global phenomenon representing more than US$30 trillion in assets under management. As such, it is one of a number of visible manifestations of the growing concern – in business and across the wider public – with the UN’s Sustainable Development Goals (SDGs). The three dimensions of ESG are concerned with reporting data on: Environmental: activities impacting on climate change, greenhouse gas emissions, biodiversity loss, deforestation/reforestation, pollution mitigation, energy efficiency and water management. Social: activities relating to employee health and safety, working conditions, equality, diversity, and inclusion (EDI), and issues relating to customer satisfaction and employee engagement. Governance: transparency in relation to corporate governance issues such as preventing bribery, corruption, director/board diversity, executive compensation, cybersecurity and privacy practices, and management structure. Whilst ESG was initiated as a risk framework for investors, it has become a widely understood shorthand for ‘good’ business, and an aspirational label for organisations around the globe. ESG AND BUSINESS SCHOOLS Unsurprisingly, business schools are also waking up to ESG, and its potential to underpin postgraduate and management education. At an undergraduate level, practical initiatives have included the establishment of ‘living labs’ where staff, students and communities can collaborate to make 20 |
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