S-FVC23 BV - ESG: Over Sold, Over Hyped and Over the Top

Session Description

ESG (Environmental, Social and Governance) has become the hottest concept in business, with consultants, bankers and investors all looking to it, as the magic bullet. Along the way, it has brought with it some of the emptiest concepts in business, with sustainability taking a lead role. In this session, I argue that the concept is not just flawed, but fatally so, for many reasons. First, “goodness” is in the eye of the beholder, and assuming that ESG services can somehow find consensus on society’s most debated questions is not delusional but dangerous. The defense that ESG services offer that ESG measures risk or materiality is revisionist history, an after-the fact reframing to cover ESG’s failure. Second, the notion that being “good” will make companies more “valuable” is an assertion, not proof in itself. In fact, there is little evidence that being good makes companies more profitable and valuation, though there is some evidence that “not being bad” can be a risk-reducing strategy. Third, the promise that investing in good companies will deliver higher returns is just that, a promise, and the evidence on the link between ESG and returns is weak. In fact, almost all of the payoff from the ESG factor seems to come from tech companies looking better on ESG factors. 

Speaker

Aswath Damodaran, Professor of Finance | Stern School of Business at New York University

Continuing Education

Review of this session recording will award 1 CE hour. 

CPE credit is not awarded for this pre-recorded offering.