What is ESG and why might it lead to poor decision-making?

You probably know it’s short for Environmental, Social, and Governance; an acronym that covers three topics of interest to investors. In simple terms, three things they look for to determine how environmentally and socially conscious the company is. Or in even simpler terms, is this a good, ethical company?

As regular listeners will know, this isn’t an investment podcast, so what’s the human risk angle here? Well, metrics like ESG are a good example of how we develop systems - in this case metrics that are ways of analysing the way in which companies are run — that allow us to answer complex questions. There’s nothing wrong with keeping things simple. Yet, as ESG illustrates, those systems can sometimes over-simplify the world such that we miss things, induce unintended consequences and feel good about ourselves when in fact we really shouldn’t.

So I wanted to explore what ESG is and the flaws of looking at the world through the artificial lens it creates.

My guest on this episode is Alison Taylor. She’s the Executive Director of Ethical Systems, part of NYU Stern School of Business, which is a collaboration between leading academics working on behavioural science, systems thinking and organizational psychology. Ethical Systems aim to help companies build more ethical and effective cultures via approaches based on credible research. We are dedicated to driving a more holistic and considered approach to the future of corporate integrity, beyond functional silos.

Alison has been on the show before - there’s a link to that below — and is always incredibly insightful and great company.

In our discussion, we dissect what ESG means — in theory, and in practice — and explore how companies are responding to it. That takes us onto questions such as ‘how are companies responding to social trends like ‘Black Lives Matter’, ‘are companies right to insist that people return to the office/work from home’ and ‘should companies have a position on every social issue that comes up?’.

To find out more about Alison and Ethical Systems visit ww.ethicalsystems.org/

You’ll find her on Twitter: https://twitter.com/followalisont and LinkedIn: https://www.linkedin.com/in/followalisont/

Discover the Breaking The Fever podcast here: https://www.ethicalsystems.org/breaking-the-fever-podcast/
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