The fundamental problem with ESG? Conflicting letters

Christos Cabolis, Maude Lavanchy () and Karl Schmedders
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Maude Lavanchy: IMD, Postal: IMD, Chemin de Bellerive 23, CH-1001 Lausanne Switzerland

Journal of Financial Transformation, 2023, vol. 57, 110-117

Abstract: The term ESG – short for environmental, social, and governance – is routinely used to capture organizations’ efforts to be more climate friendly and socially inclusive and to employ sound governance practices and processes. Although ESG criteria are well-meaning, the term lumps together concepts that are profoundly different on at least three dimensions: (1) the excludability of the benefits of an action, (2) the temporal gap between investment and the realization of its returns, and (3) the uncertainty surrounding any given action’s outcome. In addition to these differences, E frequently goes head-to-head with S (both within and across countries). We propose a path forward, on the way investigating the solutions that businesses can explore in order to build a more sustainable future.

Keywords: ESG; excludability; just transition; tragedy of the commons; tragedy of the horizon; uncertainty (search for similar items in EconPapers)
JEL-codes: D23 G32 M14 Q56 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:ris:jofitr:1696

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