Few today would argue that environmental, social, and governance (ESG) investing has no bearing on corporate decision making. From commitments to reducing waste, moving to wind power, increasing charitable donations, diversifying suppliers, hiring diversity, equity, and inclusion (DEI) directors, and implementing parental leave policies, ESG investing is impacting how businesses operate. Despite the global meteoric rise of ESG investing over the last ten years, some United States politicians, executives, and fund managers are predicting the death of ESG.
ESG investing reflects an approach to ethical decision making known as the common good framework. Those who appeal to the common good claim that we ought to cooperatively work towards establishing systems, institutions, and environments that benefit all stakeholders. However, critics of ESG investing argue that ESG funds financially underperform and do not seem to deliver better ESG performance. If the critics are right, then ESG investing cannot be said to promote the common good and can rightly be considered a sham.
This paper will review the challenges companies are facing regarding ESG investing and offer possible solutions.