The Rise Of ESG

 Early in June, when BaFin inspectors and police descended on the company's Frankfurt headquarters to look into charges of greenwashing, the largest money manager in Germany, DWS, was rocked by scandal.

 

When promises about following environmental, social, and governance (ESG Consulting) principles are inflated or outright fraudulent, this practice is known as "greenwashing." Given that the claims could apply to up to half of the $900 billion that DWS has under management, the DWS case may be an obvious example of prospectus fraud. 

The bank BNY Mellon has been punished here in the US. The Securities and Exchange Commission is reportedly looking into the venerable Goldman Sachs because of overstated ESG Strategy claims made in its fund management division, according to the Wall Street Journal. 

This whole thing shouldn't be shocking. ESG Reporting has recently become a buzzword that investment managers and C-level executives are shouting from the rooftops. According to the Financial Times, there are currently more than 3,000 investment organizations with $103 trillion under management that assert to be "integrated" with ESG in some way. 

However, proposals for corporate reform predate the existence of corporations. Why is there suddenly such a feverish endeavor on everyone's part to at the very least pay lip service to ESG Consultant? For instance, the movement known as "stakeholder capitalism," which gave rise to ESG Meaning, first surfaced in the 1970s but received little attention from the media. 

When it came to the then-dominant ideas regarding the nature of the business, Nobel laureate economist Milton Friedman was at the height of his influence. According to Friedman, profit was king, and businesses that maintained a laser-like focus on generating profit and shareholder value were best-serving society. Later, the concept of "trickle-down" societal benefits emerged. 

But in the year 2020, Freidman's ideas were attacked more than ever. The Me Too movement following Harvey Weinstein's downfall, the death of George Floyd, and a perfect storm of events that seemed to overnight galvanize the body politic all contributed to the new thinking. The perfect storm of events included climate change as unprecedented wildfires swept through California and other states, George Floyd's death, and the death of George Floyd. 

All of these gained notoriety and propelled ESG Consultant to the top of business agendas like an express elevator.



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