Despite the ubiquity of the acronym, it is not always clear what fits under the umbrella term of ESG. Often used interchangeably with ‘green’ investing, environmental, social, and governance (ESG) covers everything from lobbying disclosures to affirmative action policies for firms.
While these ESG policies are often subjective and political, proponents tend to claim that they are an objective lens to value firms and allocate investments. The evidence for this claim is weak, however.
For many activist investors and politically-motivated institutional investors, investment performance may not be the main priority. ESG can be used to provide activist investors a framework to