Sure, the "G" in ESG stands for "governance," but ESG and good governance aren't the same.
Background music is Of the Stars by KC Roberts & the Live Revolution
SCRIPT:
ESG is an initialism referring to Environmental, Social & Governance. I remember when I first heard the term ten, eleven, twelve years ago, I assumed that what it was trying to get at was an organization’s governance when it comes to environmental or social factors, and it’s secretly how I continue to think of the term. But that’s not what ESG means out in the real world. ESG is really just a catch-all for non-financial factors that people might want to take into consideration when running an organization or measuring an organization’s performance. Whether you like my definition of ESG or the real-world definition, or some other interpretation, I bet it has started to impact your idea of what good corporate governance looks like. Here’s a generic example: if an organization fails to take environmental or social factors into consideration when making an important decision – say, opening a new mine, or cutting down old-growth forest – I ma, they completely fail to take any interest at all in the potential environmental or social impact of their decision…is that good governance? OF COURSE NOT! Not just because it seems somehow immoral or evil, but because it’s important to consider as many factors as possible or else we’ve failed to create the conditions for an effective decision. But let’s say we DO take E and S into account when doing G. Is that sufficient on its own to say we have good governance. Um…no.
Create your
podcast in
minutes
It is Free