Institutional Investor: Where ESG Fails

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.

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