Sustainable: Moving Beyond ESG to Impact Investing

Terrence Keeley

"Modern capitalism is a mess, and a growing number want finance to fix it. Their chosen cudgel ESG (Environmental, Social and Governance) investing has become a $100 trillion phenomenon in the past half-decade alone. Its success or failure will impact every living creature on earth. Today, ESG priorities drive the strategies of the world's largest corporations; prioritizing shareholders is out; protecting the environment and elevating other stakeholders is in. ESG rules increasingly dictate the investment choices of the world's largest retirement plans and sovereign wealth funds. Yet few know what ESG stands for, let alone how its rules are written or what their consequences will be. Will ESG investing succeed? Not if it stifles entrepreneurialism, subverts market discipline, negates personal responsibility, or forces asset managers to supplant values for valuations, industry insider Terrence Keeley argues. Governments, businesses, civic society and individuals all have crucial roles to play if we are to avoid a climate disaster, end discrimination, promote economic mobility and provide billions of pensioners financial security in their retirements. Obscuring stakeholder responsibilities and ignoring comparative advantage further risks the loss of prosperity and financial stability without protecting the earth from further despoliation. ESG investing is premised on two false tenets: that divestment threats directly alter corporate behavior, and that verifiably good corporations make for great investments. Keeley argues it's time to reassess what ESG has accomplished and where it is heading. The Stakes reveals how ESG investing must be recalibrated and reinforced if it's to have its intended effects. But all is not lost. There are hundreds of companies and NGO's that already provide beneficial, scalable solutions. And those who wish to deploy their capital to improve the world and produce superior returns can consider impact investing instead of indexed ESG funds"--