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PreprintCited by 15Corporate Social Responsibility ReportingSustainable Finance and Green BondsFinancial Reporting and Valuation Research

The DOI matches its Crossref record; 5 of the 5 references it cites were found in a registry or an index.

The End of ESG

Open access
Edmans, Alex·2022·SSRN Electronic Journal
DOI 10.2139/ssrn.4221990
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Abstract

ESG is both extremely important and nothing special. It's extremely important because it's critical to long-term value, and so any practitioner or academic should take it seriously, not just those with "ESG" in their job title or list of research interests. Thus, ESG doesn't need a specialized term, as that implies it's niche. Considering long-term factors when valuing a company isn’t ESG investing; it’s investing. It's nothing special since it's no better or worse than other intangible assets that drive long-term value and create positive externalities for wider society, such as management quality, corporate culture, and innovative capability. The following implications follow: 1. Companies shouldn't be praised more for improving their ESG performance than these other intangibles; investor engagement on ESG factors shouldn't be put on a pedestal compared to engagement on other value drivers. We want great companies, not just companies that are great at ESG. 2. Investors who greenwash are correctly being held to account. But so should other investors who fail to walk the talk, such as actively-managed funds that closet index or systematically underperform. Clients of non-ESG funds deserve the same protection as clients of ESG funds. 3. Practitioners shouldn’t rush to do something special for ESG factors that they wouldn’t for other drivers of value, such as demand that every company tie executive pay to them, force a firm to report them even if not relevant for its particular business, or reduce complex intangibles to simple quantitative metrics. 4. Many of the controversies surrounding ESG become moot when we view it as a set of long-term value factors. It’s no surprise that ESG ratings aren’t perfectly correlated, because it’s legitimate to have different views on the quality of a company’s intangibles. We don’t need to get into angry fights between ESG believers and deniers, nor politicize the issues, because reasonable people can disagree on how relevant a characteristic is for a company’s long-term success.

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Citations

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Research works printed but not linked: 50

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Metadata

Authors
Edmans, A.
Affiliations
European Corporate Governance Institute (BE)
Corresponding author
Edmans, Alex
ORCID
Edmans, Alex
Venue
SSRN Electronic Journal
Publisher
Elsevier BV
Published
2022
ISSN
1556-5068 (ISSN-L)
DOI
10.2139/ssrn.4221990
OpenAlex
W4296834238
Cited by
15
References
5
Citations by year
2026: 2 · 2025: 7 · 2024: 1 · 2023: 5
Type
posted content
Language
en
Open access
Locations
SSRN Electronic Journal (acceptedVersion)
Topics
  • Social Sciences › Business, Management and Accounting › Strategy and Management › Corporate Social Responsibility Reporting
  • Social Sciences › Economics, Econometrics and Finance › Finance › Sustainable Finance and Green Bonds
  • Social Sciences › Business, Management and Accounting › Strategy and Management › Financial Reporting and Valuation Research
Keywords
ESG investing, long-term value, intangible assets, corporate governance, shareholder engagement, greenwashing, ESG ratings, executive compensation, organizational culture, management quality, innovation ability, corporate social responsibility

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Edmans, A. (2022). The End of ESG. SSRN Electronic Journal. https://doi.org/10.2139/ssrn.4221990