ABSTRACT
ESG is based on a faith that more disclosure and more data lead to bigger profits for businesses, market-beating returns for investors and social and environmental transformation for the world. But there has been remarkably little scrutiny of such claims. This chapter contributes to the research by showing how little evidence exists that the screening and scoring, integration and indices that characterise the bulk of ESG lead to any real-world impact. It explains why current disclosures and the explosion of ESG data are creating ripples, not waves. Next, it outlines the theory of how sustainable finance is meant to create change. It’s all based on a business case and investment rationale. The chapter proposes that there are limits to that business case, and so financial materiality can only partially drive change. The theory and evidence for the business case are unpacked. It is suggested that ethics needs to play a more fundamental role in sustainable business and finance. The chapter concludes by examining how systemic change and government action need to go hand in hand with stronger accountability and voluntary action by companies and financiers.
