The Business Case for ESG

The Business Case for ESG

By
Brandon Boze, Margarita Krivitski, David F. Larcker, Brian Tayan, Eva Zlotnicka
Stanford Closer Look Series. Corporate Governance Research Initiative, May
2019

Recently, there has been debate among corporate managers, board of directors, and institutional investors around how best to incorporate ESG (environmental, social, and governance) factors into strategic and investment decision-making processes. In this Closer Look, we examine a framework informed by the experience of ValueAct Capital and include case examples.

We ask:

  • What is the investment horizon prevalent among most companies today?
  • Do companies miss long-term opportunities because of a focus on short-term costs?
  • How many companies have an opportunity to profitably invest in ESG solutions?
  • What factors determine whether a company can profitably invest in ESG solutions?
  • Can investors earn competitive risk-adjusted returns through ESG investments?
  • If so, how widespread is this opportunity?