What is ESG thinking?

Here’s a question: 

is it ‘Environment, Society and Governance’ or is it ‘Environment, Society, Governance’? 

What’s the difference? You might ask.

 The former treats each component separately while the latter treats ESG as a single entity. In the former, approaches to each are considered, developed and managed as stand-alone concerns. In the latter, the inter-connectedness of each domain is recognised and actively considered in ESG strategies and actions.

Presently we hear a lot, actually an awful lot, about climate change and global warming (and the related concern to reduce carbon emissions). We actually hear a lot less about ‘society’ and what this might mean an even less about ‘governance’, as if we don’t really understand it or see it as a bit of a boring topic.

There are two main problems with this: 

1. ‘environment’ means a whole lot more than climate change 
2. ‘Environment, Society and Governance’ are incredibly intertwined to the extent that one cannot really separate them. T

The problem with this, of course, is that it makes ESG an incredibly complex concept and, potentially, even more difficult to decide how best to promote actions that are ESG active.

It is, in fact, almost impossible to think of a single environmental concern that has no impact on society and governance. Likewise, how can we think about matters of governance separate from environmental concerns?

Despite this, those within the finance sector, globally, that are leading the ESG revolution and the more progressive governments round the World are only really taking seriously about climate change. Whilst this is, it must be said, an incredibly important topic, it is a very reductionist in its understanding and approach to the concept of ESG. The current range of ESG rating agencies, whilst they take into account a range of E and S and G factors in their ratings, they do so separately meaning, at best, we fail to see the linkages and, at worst, improvements in E, for example, can actually mean negative impacts on S.

Fragmented thinking will serve us poorly in the future. It is essential that we grapple with the complexities of ESG, appreciate the interconnectedness of the myriad elements and think much more in terms of systems of action.