The figures on environmental, social, and governance (ESG) investment we’ve been seeing over the last few years are substantial. According to the US SIF Foundation, $12 trillion in assets under management using ESG strategies at the beginning of 2018 grew to $17.1 trillion by the beginning of 2020, an increase of 42 percent. Bloomberg Intelligence reports ESG assets at $35 trillion in 2020, up from $30.6 trillion in 2018 and $22.8 trillion in 2016, accounting for one-third of total global assets under management. The same study holds that by 2025 ESG assets are on track to exceed $50 trillion.
These are big numbers, and they are already bearing dividends: many businesses are starting to get environmental action right—the “E” of ESG—and through paying attention to executive compensation and getting more diversity on boards, many companies are also starting to get governance right, the “G” of ESG. Environmental impact is relatively easy to measure: carbon emissions, deforestation, waste management, and water usage are all tangible factors lending themselves to quantitative assessment. Governance matters too can be held to account by quantifying executive pay, representation of non-white, non-male board members, political contributions, and large-scale lawsuits, all of which can be reduced to numbers.
But what about the “S,” or the social component? By comparison, the social component consists of much more qualitative factors, things like employee gender and diversity, data security, customer satisfaction, human rights, and fair labor practices at home and abroad. Because these more amorphous factors are a lot harder to measure in numbers, the “S” factor is always prone to falling out of ESG considerations. For this reason, it is all the more important to emphasize social factors that are measurable, such as public health. While Public Health might be implicit in Social, it is not explicit. Therefore, by attaching an “H” for “Health” and broadening the mandate to ESHG, we’ll come closer to a more inclusive form of capitalism, one that places equal emphasis on causing human capital to flourish as it does on financial capital.
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