How ESG went from the periphery to the heart of business discourse

Brian Tomlinson from Ernst & Young LLP, and Alex Edmans, Professor of Finance at London Business School, discuss how the environmental, social and governance (ESG) space is at a remarkable phase of its development, having gone from being a niche part of corporate and capital markets discourse to being part of the mainstream. The trends that have been driving that include market participants making commitments around ESG, large corporations embracing aspects of ESG disclosure, and in recent years, the ESG disclosure ecosystem being adopted by regulators in key markets across the world.

We appear to be at a high watermark for ESG, and Alex Edmans, Professor of Finance at London Business School, discusses how his paper, “The End of ESG,” highlights how ESG should be mainstream for executives and investors. There are many risk factors and opportunities with ESG that can affect the long-term valuation of a company.

Key takeaways:

• It shouldn’t matter what side of the political spectrum you are on. Everyone should want companies that create long-term sustainable value and are profitable in the long-term.
  
• ESG ratings look at various ESG risks or opportunities and rate a company based on whether they’re managing the risks or leveraging the opportunities as best they can. Investors should examine the analysis that underpins the recommendation to aid in their decision-making.
• Although the focus on ESG factors has brought greater attention to the intangible assets of a company, investors today should go beyond ESG and look at all value drivers equally.  

For your convenience, full text transcript of this podcast is also available. Read the transcript.