CEOs Need ESP For ESG

Jeffrey Sonnenfeld writes in Chief Executive:

In 1979, the industrialist George Weyerhaeuser told me, “We have a license to operate from society, which can be revoked if we violate its terms,” referencing a corporate social responsibility movement popular at the time. BlackRock CEO Larry Fink’s 2018 letter to CEOs is a new clarion call for CEO attention to a similar sentiment, rebranded as ESG (environmental, social, governance).

This mega-investment firm manages $6 trillion in investments through pension funds, mutual funds and exchange-traded funds, ranking it as the largest investor in the world—a platform that makes Fink hugely influential in governance dynamics.In Fink’s words, “Society is demanding that companies, both public and private, serve a social purpose.  To prosper over time, every company must not only deliver financial performance, but also show how it makes a positive contribution to society.”

Our view: the unstated implication here is that ESG is a trade-off against long-term returns. We argue the contrary, and that is why the more recent term SDG (sustainable development goals) is a more accurate way to describe those elements of environmental, governance, and social benchmarks that are too often materially understated in financial disclosures and underestimated in strategic planning.

Source: CEOs Need ESP For ESG

One Comment Add yours

  1. Mimi Hoffman says:

    I see it differently. I think Larry Fink is being a responsible leader! To me he embraces the data that having an ESG “philosophy” is good for business. Philanthropy can be a solid economic development strategy. But, Black Rock is focusing on how certain investments, while
    OK short term for the company are not OK long term for the common good. ESG is not meant for the perfectionist, or what Barry Schwartz calls the maximizer in his book The Paradox of Choice. ESG aspires to “Good Enough,” the “satisfier” trajectory. I write about this in my 2nd blog post and will be going back to it soon in an upcoming post. What positive changes could be on the horizon if NYS Comptroller DiNapoli could become an activist investor within ESG funds, advocating with fund managers that they reduce their fossil fuels positions, rather than trying to convince Exxon.

    Like

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