The Rise of ESG Investment

These Days, the talk of ESG is prevalent throughout both the public (government) and private sector. First coined nearly two decades ago, the newborn economic term ESG (environmental, social, and governance) has been rapidly expanding its significance within the global financial stage. Due to such prevalence throughout both the public and private sector, corporations worldwide are now more entitled to respond to a larger variety of non-business factors (climate change, health and safety policies, etc.) than they would have 30 years ago. In this report, I will elaborate the history of the term ESG, and what controversial viewpoints are currently arising about it.

The rise of ESG investment and its values can be traced back to the 2000s, when a growing number of investors began to focus on the impact of companies on the environment and society. This led to the development of ESG criteria, which allowed investors to assess companies based on their environmental, social, and governance performance. Today, ESG investing has become a mainstream approach, with trillions of dollars in assets being invested in companies that meet ESG criteria.

The values of ESG investing are based on the belief that companies that are environmentally and socially responsible and have good governance practices are more likely to perform well in the long run. This is because such companies are better able to manage risks and take advantage of opportunities, and are more likely to have the support of stakeholders, including customers, employees, and investors. ESG investing is also seen as a way to drive positive change, as companies that are held accountable for their impact on the environment and society are more likely to take steps to reduce their negative impact and improve their positive impact.

However, there are also controversial viewpoints arising about ESG investing. Some critics argue that ESG investing is too subjective and lacks clear standards, making it difficult to compare companies or assess their performance. Others argue that ESG investing is a form of "greenwashing," in which companies promote their environmental and social credentials to attract investors, without actually making meaningful changes. There are also concerns that ESG investing may lead to divestment from certain industries or companies, which could have unintended consequences.

Despite these controversies, ESG investing is expected to continue to grow in importance in the coming years, as investors increasingly prioritize environmental, social, and governance factors in their investment decisions. This is likely to have a significant impact on companies, as they are held accountable for their impact on the environment and society. As ESG investing becomes more mainstream, it is important for investors and companies alike to engage in open and transparent dialogue about the values and standards of ESG investing.