Investors Can—and Should—Push for Change

 It’s common-sense capitalism. It’s clear that positive and negative social impacts show up on a company’s bottom line. Most investors are long-term thinkers with the ability to push for changes so a company thrives over the long term.

ESG impacts are hard to quantify, and the system today is built upon a scattered, rankings-oriented approach; we don’t think this is right because it doesn’t translate directly to financial value. We believe the solution to this is to put a tangible, dollar value on the ESG impacts a company generates, which allows investors to incorporate ESG criteria directly into investment strategies alongside traditional financial analytics. In other words, it ties ESG criteria directly to economic outcomes.

When you can understand the connection between a company’s operations and impacts—and can measure those impacts in dollars and cents—strategic decisions that seemed opaque become clearer and hard choices become easier to make. ESG data become more than the basis of a subjective rating: they form the core of a financially driven analysis, a new tool for making capital allocation decisions that create long-term value and make a meaningful social difference.

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Citation: OECD www.oecd.org