ESG: A distraction, or a path to real impact?

Ahead of the Shared Value Summit, Rosemary Addis AM speaks to Pro Bono News on the limitations and opportunities of ESG in creating impact

While ESG is increasingly pitched as the answer to keeping businesses accountable to their social and environmental goals, experts say it’s far from being a sufficient solution on its own. 

Referring to the environmental, social, and governance practices of an investment that may have a material impact on the performance of that investment, ESG has shifted from buzz-word to mainstream in just a few years.   

But according to Rosemary Addis AM, the executive director of Impact Strategist, viewing ESG as the only answer to ensuring business accountability to environmental and social problems, is not quite right. 

“I think ESGs are necessary, but not sufficient,” Addis told Pro Bono News. 

“It gives us some useful tools, but most of those tools are backward looking.” 

See also: ESG – What does it mean?

Addis was speaking ahead of the Shared Value Summit on Thursday, where she will moderate a panel on the economics of impact, discussing whether or not ESGs are more of a distraction rather than a true path to long-term impact. 

The panel – which features a diverse range of voices from the investor community including Jennifer Buckley, the senior managing director of SEA Women’s Economic Empowerment Fund; Daniel Roarty, the chief investment officer of AllianceBernstein, and Mary Delahunty, the head of impact at HESTA – will also explore how investors can apply a shared value lens to ESG to bring materiality and impact jointly into focus. 

This is something that Addis said was key to the business world actually having an impact, because a shared value approach (which is a way for businesses to solve social and environmental issues profitably) invited players to “look at the whole picture”.  

“Getting granular about goal setting and taking an integrated approach goes beyond reporting, to include the social and environmental factors in a strategy, in their governance and actively managing for that,” Addis said.

“That’s the difference between applying a screen or selectively looking at factors in the work that you’ve been doing relative to saying, are we actually making progress here? Is anybody better off as a result? Are we still doing things that create harm or are we contributing solutions?” 

She said that in a time where the world was still battling coronavirus, and grappling with the impacts of climate change, it was important the investing community reconsidered the way they were doing business. 

“We need to pay urgent attention to this, because the companies that thrive into the future will be better able and better equipped to deal with these issues, to manage systemic risks and to craft a prosperous and successful path forward,” Addis said. 

To see a full list of speakers and events for the Shared Value Summit, head to the event website here.