The Intuitive Case For ESG
August 2015 | Paul Herman, Lih-Hann Chiu
The Intuitive Case for ESG


As the quantifiable metrics of environmental, social, and governance (ESG) performance of public companies become ever more plentiful, structured, and timely, many investors are asking an important question: “why should I care?”


Often, the premise behind this skeptical question is the underlying belief that the increasing focus on ESG is a perception that this is a marketing fad that will fade over time, as much of what is being touted by ESG advocates feels subjective, intangible, and unproven as a meaningful factor in investment analysis. Such skepticism on ESG links to the belief that “doing good” comes at the expense of efficiency and profit – that businesses should sacrifice their duty to shareholders for the sake of an arbitrary value system.


In reality, these ESG metrics are actually new factors for investors on how they could make more money, lower risk and have more resilient portfolios. In 2015, more than 4,500 companies report ESG data and metrics – tracked by Morgan Stanley spin-off MSCI, Inc. (MSCI) ; Sustainalytics, a new partner of Morningstar, Inc. (MORN) , European firm Oekom, IW Financial; and our ESG ratings firm HIP Investor.

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