ESG scoring
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26 Apr, 2019
Milton Friedman's assertion in his 1970 New York Times article that the social responsibility of every enterprise was to maximise profit led to a singular focus on shareholder value and the financial capital that supported it. But a sense developed that shareholder value growth was coming at the expense of other stakeholders and so was not truly value-creative in an holistic sense. A more complete assessment of value creation was clearly needed; one that explicitly considered extra-financial risks and opportunities. Various monikers have been tried over the years, but 'ESG', Environmental, Social and Governance, has today become established as the prevailing industry term.
Defining progress in broader terms than just shareholder value requires support from new types of information. The market has responded and today there are many alternative providers of such data who provide ratings on E, S and G, including the market leaders MSCI and Sustainalytics. Smaller competitors such as TruValu and Robeco also feature whereas others focus on specific aspects, for example CDP, South Pole and TruCost who address environmental aspects, and firms like Glassdoor who do the same for elements of social capital.
