There Is No “C” In “ESG”: An Illustration of ESG’s Biggest Risk

Doug Chia of Soundboard Governance raises concerns that ESG is becoming such a catch-all that it may lose any meaning.

One could argue that the term “ESG” is best used as shorthand for anything not typically measured with traditional financial metrics, or “externalities” in general, and pedantic arguments over specific words and letters (like this blog post!) miss the point.  But the possibilities for what is an ESG issue cannot be endless.  What is not ESG?  An undisciplined approach to what constitutes ESG will render it meaningless to those who need to understand its importance (e.g., Warren Buffett),and an absence of boundaries makes ESG ripe for manipulationco-option, and ridicule by those with ulterior motives (e.g., the Free Enterprise Project).  Continuing down this path will undermine the concept of ESG as a critical component of business and investment decisions.  ESG’s own biggest risk may be that it can be whatever you want or need it to be.

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