Institutional Investor: Where ESG Fails
Despite countless studies, there has never been conclusive evidence that socially responsible screens deliver alpha. A better model exists, argue Harvard Business School luminaries Michael Porter, George Serafeim, and Mark Kramer.
We are entering a new stage of understanding of the linkage between investment performance and social impact. Previous approaches, such as socially responsible investing and environmental, social, and governance screening, have obscured the opportunities for higher growth, profitability, and competitive advantage that come from treating social and environmental issues as integral to a company’s core strategic positioning. We term profit-driven social impact “shared value.” Emerging evidence, although still limited and company-specific, suggests that companies that successfully implement strategies to create shared value can deliver superior shareholder returns. Capturing that value, however, will require very different practices on the part of both corporate leaders and investors.