When the United Nations published Who Cares Wins in 2004, it gave the world a new framework and a vocabulary. Environmental, Social, and Governance (ESG) criteria arrived with institutional weight behind it. Financial firms, analysts, investors and boards were all addressed directly with a simple message – sustainability is your business too.
In reality, the response, for the better part of two decades, has been largely performative.
ESG 1.0 produced reports, frameworks, disclosure regimes and ratings, and very little else of substance. The data was always there, measuring the environmental cost of infrastructure is not technically difficult, but accepting that data meant confronting uncomfortable realities, and most organisations discovered they preferred their sustainability commitments at a comfortable distance from their operational decisions.
The financial case was not exactly compelling either. A University of Chicago analysis of over 20,000 mutual funds found that the highest-rated ESG funds attracted more capital than the lowest-rated but failed to outperform them financially.
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