Most Americans Still Unclear About What ESG Means, Survey Finds (2024)

FAQs

Most Americans Still Unclear About What ESG Means, Survey Finds? ›

The survey by the public affairs firm Global Strategy Group and SEC Newgate found 78% of Americans are either not familiar with, have never heard of or are not sure what the corporate term—short for environmental, social and corporate governance— actually means.

Yes, an ESG focus can help active managers account for risks such as a regulatory backlash or governance blow up, which in some cases might be highlighted by new company disclosures. This month the European Union cleared the way toward requiring firms to better report and address sustainability impacts.

ESG data is compromised by interdependence

The weaknesses of primary ESG data feeds through the value chain and are magnified in the process. Data collectors and providers depend on self-assessed disclosures and interpret this data according to their own varying practices.

ESG stands for environmental, social, and governance. ESG investing refers to how companies score on these responsibility metrics and standards for potential investments. Environmental criteria gauge how a company safeguards the environment.

Yet, ESG has almost taken on a life of its own and is often pursued as an end in itself. But that can backfire because ESG misses a vital part of the puzzle – economics. To keep that key in mind, we should recast ESG as “EESG”, with economics firmly in the frame.

One of the biggest criticisms of ESG is that it perpetuates what it was partly designed to stop – greenwashing.

'COP-Out: Is ESG falling from favour? ', Luther Pendragon's latest AI-powered analysis of ESG thought leadership, found that ESG issues are now having to compete harder than ever for media attention – with overall coverage hitting an all-time low since our analysis began.

It refers to a set of metrics used to measure an organization's environmental and social impact and has become increasingly important in investment decision-making over the years. But while the term ESG was first coined in 2004 by the United Nations Global Compact, the concept has been around for much longer.

While not mandatory, SASB's guidelines are increasingly recognised and adopted by US corporations aiming to meet investor demands for ESG data that can inform investment decisions.

In the United States, ESG-related regulatory risk primarily originates from three key sources: the US Securities and Exchange Commission (SEC), the US Department of Labor (DOL), and state legislatures and agencies.

What are the top 3 ESG issues? ›

The large-scale trends shaping the ESG investing world have become well recognized: Climate change risk and the road to net zero, the growing existential threat of biodiversity loss, social inequalities, regulation and, lately, debate and controversy over greenwashing and what ESG should be.

ESG Risks are those arising from Environmental, Social and Governance factors that a company must address and manage. These risks are a combination of threats and opportunities that can have a significant impact on an organisation's reputation and financial performance.

Not tracking the right metrics: “What gets measured gets managed”. An essential part of ESG success is to track the right metrics. To make the biggest impact companies are advised to make a materiality assessment to see where to focus their efforts.

Evidence of Decline

The enthusiasm for launching new ESG funds has also waned. While previous years saw a proliferation of new ESG products, recent data indicates a slowdown. Regulatory uncertainty and political rhetoric have led to a more conservative approach among fund managers.

The transition to a decarbonised future is likely critical to the long-term resilience of companies, the economy and the planet as a whole. Strong ESG strategies and frameworks should be vital to economic recovery and for companies to thrive in the long term.

Many of those companies also saw increases to their bottom lines alongside the ESG-inspired changes they made. So, yes, ESG does actually create serious, measurable good. And while you may not be able to get a dollar-to-net-impact metric just yet, that doesn't mean that ESG isn't worth investing in.

ESG investing appears to be losing momentum, as evidenced by several developments in October 2023. Lastly, there has been a growing conservative backlash against ESG initiatives, with ESG becoming a politically charged term.