ESG investing, or, if you can’t beat ‘em, join ‘em

Abstract

If corporate purpose debates concern whether corporations should operate solely to benefit their shareholders, or if instead they should operate to benefit the community as a whole, “ESG” – or, investing based on “environmental, social, and governance” factors – occupies a middle ground. Its adherents welcome shareholder power within the corporate form and accept that shareholders are the central objects of corporate concern, but argue that shareholders themselves should encourage corporations to operate with due regard for the protection of nonshareholder constituencies. This Chapter, prepared for the Research Handbook on Corporate Purpose and Personhood (Elizabeth Pollman & Robert B. Thompson, eds., Elgar), will explore the theory behind ESG, as well as the barriers to its implementation.