Dec. 1, 2014
This paper intends to provide an in-depth perspective on the following points:
• The world's best “business value investors” have long incorporated environmental, social, and governance (ESG) considerations into their investment decision‐making.
• While the ESG framework may be relatively new, it can be thought of as providing a lens through which to view the age‐old issue of “quality.”
• Regardless of whether they use the labels “E,” “S,” and “G,” investors who make judgments about earnings power and sustainable competitive advantage are routinely incorporating ESG considerations into their decision‐making.
• Corporate reporting on sustainability issues should be viewed as analogous to and an integral part of financial reporting, with a management focus on materiality and relevance (while avoiding a “promotional” approach) that is critical to credibility.