From a financial to an entity model of ESG

MacNeil, I. and Esser, I.-M. (2022) From a financial to an entity model of ESG. European Business Organization Law Review, 23(1), pp. 9-45. (doi: 10.1007/s40804-021-00234-y)

Abstract

ESG investing evolved over time from the earlier concept of CSR. The process of evolution moved the focus from the external impact of corporate activities to the risk and return implications for financial investors of failing to address ESG issues in their portfolio selection and corporate engagement. The bridge between the two approaches was the framing of sustainability in the early part of the millennium as an overarching concept that could be mapped onto the supply of capital and the techniques employed by institutional investors. The financial model of ESG investing is now the standard approach around the world and is reflected in ESG ratings, codes, guidance and regulatory rules. It focuses on the role of capital and investors in driving change in sustainability practices and pays much less attention to the role of board decision-making and directors’ fiduciary duties. In this research, we trace the origins and trajectory of this change in emphasis from CSR to ESG and attempt to explain why it occurred. We identify shortcomings in the financial model of ESG investing and propose an alternative ‘entity’ model, which we argue would more effectively promote sustainability in the corporate sector around the world.

• Item Type: Articles
• Status: Published
• Refereed: Yes
• Glasgow Author(s) Enlighten ID: Esser, Professor Irene-Marie and MacNeil, Professor Iain
• Authors: MacNeil, I., and Esser, I.-M.
• College/School: College of Social Sciences > School of Law
• Journal Name: European Business Organization Law Review
• Publisher: Springer
• ISSN: 1566-7529
• ISSN (Online): 1741-6205
• Published Online: 10 January 2022
• Copyright Holders: Copyright © 2022 The Authors
• First Published: First published in European Business Organization Law Review 23(1): 9-45
• Publisher Policy: Reproduced under a Creative Commons licence

Related URLs

• Social Science Research Network (SSRN)