ESG has risen from an obscure and niche concept to a widely used term around the world. When I started working in this area, most (if not all) of my students at Harvard Business School had no idea what ESG meant. Nowadays, they use the term ESG in the classroom taking as a given that everyone understands what they are referring to. The same experience I have had as board member, advisor, and investor. ESG has become a common term heard in investment committee, corporate management, and board director meetings. This is a remarkable development for a concept that barely existed a decade ago.

Companies now implement ESG strategies, investors develop ESG products, and regulators design ESG policies. This activity has been fueled by a significant increase in the number of ESG data that has in turn fueled ESG evaluations. These evaluations span corporates, investors, countries, products, and even universities, using a wealth of ESG metrics. Everything can be evaluated nowadays from an ESG perspective. Perhaps unsurprisingly, negative evaluations are coming with increased scrutiny for those evaluated. A frequent response is a call to distance from those with negative evaluations, through boycotts, exclusions, and divestments.

This explosion of activity has led to several hyperboles about the role of ESG in society, organizations, and markets. For some, ESG has enormous influence on corporate and investor behavior, while for others it has none. Similar levels of extreme polarized views can be found about the performance implications from ESG and about the usefulness of ESG evaluations and assessments. In this post, I seek to provide insights into three areas that are of great interest to ESG practitioners and scholars. First, I discuss several mechanisms through which the ESG field could influence corporate behavior. Second, I discuss about the connection between ESG and corporate value. Third, I discuss issues around ESG assessments and ratings.

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