The world seems headed towards an inflexion point, where a lot of experts are undertaking well-meant ESG initiatives to reverse climate risk, while another set criticizes ESG as being lopsided and often a smokescreen enabled by practices such as greenwashing
Activists of the "Koala Kollektiv" demonstrate in front of the Euro sculpture in downtown Frankfurt against greenwashing of nuclear energy and natural gas by the taxonomy of the EU.
Image: Arne Dedert/picture alliance via Getty Images
ESG—Environmental, Social, and Governance factors to evaluate the companies and countries on how far they can contribute towards sustainability—has been a buzzword in the policy forums and corporate boardrooms in recent years. All thanks to the initiatives such as the United Nations' Sustainable Development Goals (SDGs), the Paris climate agreement, the Global Sustainable Initiative (GSI), and COP-26. The Global Sustainable Investment Alliance (GSIA) reports that sustainable investments across five markets, including the United States and the European Union, reached $35.3 trillion in assets under management, which is close to 36 percent of all professionally managed assets in these markets (Figure 1).
Figure 1: Global assets under management 2016-2018-2020 (USD billions) Source: Global Sustainable Investment Review (GSIR) 2021
However, the world seems headed towards an inflexion point, where a lot of experts are undertaking well-meant ESG initiatives to reverse climate risk, while another set criticizes ESG as being lopsided and often a smokescreen. Is that really the case?
[This article has been reproduced with permission from SP Jain Institute of Management & Research, Mumbai. Views expressed by authors are personal.]