Dear federal and state policy makers,
We the undersigned faculty and researchers are writing to express our concern about the nature of attacks on environmental, social, and governance (ESG) screening, sustainable investing and stakeholder capitalism. Critics argue that investors should not have access to ESG information about companies they invest in. We think they should. Disclosure is not political; it is a tool to make sure markets work properly.
Many of us have researched these topics for years and have examined how best to protect investors from the risks presented by financially material impacts caused by climate change, water scarcity and economic inequality amongst other challenges affecting our workforces, supply chains, business models and capital markets.
We are already seeing the consequences of climate change: extreme weather damages reached more than $165 billion in the U.S. in 2022. In fact, while the 1980–2022 annual average is 7.8 events (CPI-adjusted); the U.S. has seen a significant rise in the annual average in the last 5 years (2017–2022) to 17.9 events, while climate models predict increasing losses from more frequent and extreme weather-related disasters.
ESG is a framework used to assess the current or potential impact of issues that affect a company’s bottom line to ensure that the company and its shareholders are adequately protected against risk and/or taking advantage of related new business opportunities. Corporate leaders and investors have measured and managed these factors for decades. Investors want early signals of whether a company is a good manager of material ESG issues to be good fiduciaries. Opposing disclosure makes it more likely markets will fail, because real costs and risks are not priced in.
Critics have pointed to the lack of credibility of corporate claims about ESG performance. However, strides are being made. U.S. and international regulators are working on regulatory frameworks to ensure that corporate claims are credible and vetted. These improvements are needed to ensure ESG reporting provides useful market signals.
In a world where shocks from climate change, water scarcity and poverty drive negative impacts for people and the bottom line, taxpayers, shareholders and pensioners need science-based efforts to ensure that asset managers are embracing their fiduciary duty to protect the long-term viability of shareholder returns.
In the hopes that our research into ESG will be of help in understanding its strengths and weaknesses, we have linked some academic work below:
What ESG Is and Is Not:
ESG, Stakeholder Governance and the Duty of a Corporation
ESG Reports are Not a Substitute for Sustainability
Rescuing ESG From the Culture Wars
Rethinking Environmental/Social/Governance Metrics for the Mainstream Investor
ESG and Financial Returns:
Meta-Analysis on the Correlation between ESG and Financial Performance
How Sustainability Drives Improved Corporate Performance
Five Ways That ESG Creates Value
Corporate Goodness and Shareholder Wealth
How Media Coverage of Corporate Social Irresponsibility Increases Financial Risk
The True Cost of States Banning Investors with ESG Policies:
Financial Costs of Banning ESG Policies
The Need for Stakeholder Capitalism
Edward Freeman on Business and Its Stakeholders
Spinning Gold: The Financial Returns to Stakeholder Management
We stand ready to provide more research and insights for policy discussions.
Michael Kaplowitz, Michigan State University, Professor
Robert B. Richardson, Michigan State University, Professor
John M Kerr, Michigan State University, Professor
Jason Jay, MIT Sloan School of Management, Senior Lecturer
Maxwell A. Sherman, MIT Sloan School of Management, PhD Candidate
Catherine Valentine, Monarch Business School, PhD Candidate
Pankaj Lal, Montclair State University, Clean Energy and Sustainability Analytics Center, Professor & Director
Klaus Weber, Northwestern University, Professor of Management and Organizations
Tensie Whelan, NYU Stern Center for Sustainable Business, Professor, Founding Director
Alison Taylor, NYU Stern School of Business, Clinical Associate Professor
Rachel Kowal, NYU Stern School of Business, Clinical Professor of Business Law, Associate Director Business & Society Program
Cristiano Zazzara, NYU Stern School of Business, Adjunct Professor of Finance
Jason Wong, Occidental College, Assistant Professor
Bevin Ashenmiller, Occidental College, Professor of Economics
Claire Rapp, Oregon State University, Postdoctoral Researcher
Peter Dawson Buck, Penn State University, Sustainability Institute, Local Climate Action Program, Co-Director
Ryan W. Taylor, Purchase College, SUNY, Associate Professor
Kristianna Bowles, Rice University, Sustainability Program Coordinator
Michael L. Barnett, Rutgers Business, School, Dean’s Research Professor
Jeana Wirtenberg, Rutgers Business School, Associate Professor of Professional Practice
Joanne Ciulla, Rutgers Business School, Professor Director of the Institute for Ethical Leadership
Wayne Eastman, Rutgers Business School, Professor
Rosa Oppenheim, Rutgers Business School, Professor & Vice Chair, Department of Supply Chain Management
Markus Taussig, Rutgers Business School, Associate Professor
Tony He, Rutgers Business School, Assistant Professor
Nancy DiTomaso, Rutgers Business School, Distinguished Professor
Feng Gao, Rutgers Business School, Associate Professor
Noa Gafni, Rutgers Business School, Institute for Corporate Social Innovation, Executive Director
Danielle Warren, Rutgers University, Professor
Terri Kurtzberg, Rutgers University, Professor of Management and Global Business
Ajai Gaur, Rutgers University, Professor and Chair
R.J. Multari, SUNY-Buffalo, University Faculty Senator
Matt Burnett, SUNY-Canton, Professor, Campus Governance Leader
Jack Tessier, SUNY-Delhi, Professor of Biology
Sharon Moran, SUNY Environmental Science & Forestry, Associate Professor
Annmarie Urso, SUNY-Geneseo, Associate Professor
Jessica Gilbert-Overland, SUNY Geneseo, PRODiG Postdoctoral Fellow
Runi Mukherji, SUNY-Old Westbury, Professor, Department of Psychology
Frank J. Byrne, SUNY Oswego, Professor of History
Wendy Gordon, SUNY Plattsburgh, Professor
Keith Landa, SUNY, University Faculty Senate President
Lisa Tessier, SUNY, Professor
W. Douglass Shaw, Texas A&M University, Professor Emeritus
Robert Eccles, Saïd Business School, University of Oxford, Visiting Professor of Management Practice
Shana McDermott, Trinity University, Associate Professor
Ronni Gura Sadovsky, Trinity University, Assistant Professor of Philosophy
William R Moomaw, Tufts University, Professor Emeritus
Mette Morsing, UN PRME Principles of Responsible Management Education, Professor & Head
Maria Jose Murcia, Universidad Austral, Argentina, Associate Professor
Olivier Boiral, Université Laval, Full Professor
Nadia Ameli, University College London, Principal Research Fellow
Amelia Miazad, University of California-Davis, School of Law, Acting Professor of Law
Dr. Robert Strand, University of California-Berkeley, Haas School of Business, Executive Director, Center for Responsible Business
Peter J. Jacques, University of Central Florida, Professor
Haynes C. Goddard, University of Cincinnati, Department of Economics, Professor of Economics, Emeritus
Jeffrey York, University of Colorado Boulder, Professor of Strategy and Entrepreneurship
Craig Landry, University of Georgia, Professor of Natural Resource Economics
Madhu Khanna, University of Illinois, Urbana-Champaign
Dr. Laura Henry-Stone, University of Lynchburg, Associate Professor of Environmental Sciences and Sustainability
Benyamin Lichtenstein, University of Massachusetts-Boston, Prof. of Entrepreneurship and Management
Terry Nelidov, University of Michigan, Managing Director, Erb Institute
Calli Vander Wilde, University of Michigan, PhD Candidate
Sara Soderstrom, University of Michigan, Associate Professor
Thomas P. Lyon, University of Michigan, Ross School of Business, Professor & Erb Institute, Faculty Director
Ian Kwant, University of Michigan, Ross School of Business, Erb Institute, Student-Alumni Affairs Coordinator
Timothy M. Smith, University of Minnesota, Professor, Sustainable Systems Management & International Business
Jae C. Jung, University of Missouri-Kansas City, Bloch School of Management, Associate Professor
Susan Caplow, University of Montevallo, Associate Professor of Environmental Studies
Ranjit Bawa, University of New Hampshire, Visiting Assistant Professor
Karen Patterson, University of New Mexico, Associate Professor
Daina Mazutis, University of Ottawa, Telfer School of Management, Associate Professor of Strategy
Jan Kunnas, University of Oulu, Associate Professor of Ecological Economic History
Witold J Henisz, University of Pennsylvania, The Wharton School, Vice Dean and Faculty Director, ESG Initiative; Deloitte & Touche Professor of Management
Joelle Kanyana, University of Pittsburgh, ESG Literacy Program Manager
Manjit Monga, University of South Australia, Lecturer
Tamara L. Sheldon, University of South Carolina, Associate Professor
Sunny L Jardine, University of Washington, Associate Professor
Elizabeth Demers, University of Waterloo, Professor
Eric Jamelske, University of Wisconsin-Eau Claire, Professor of Economics
Leah S. Horowitz, University of Wisconsin-Madison, Assistant Professor
Timothy Koechlin, Vassar College, Director, International Studies Program
Jennifer Kleindienst, Wesleyan University, Sustainability Director
David G. Henderson, Western Carolina University, Associate Professor
Sarah Jacobson, Williams College, Professor of Economics
Dan Esty, Yale School for the Environment, Yale Law School Hillhouse Professor and Director of Yale Center for Environmental Law & Policy
Todd Cort, Yale School of Management, Senior Lecturer
Winston Hovekamp, Yale University, PhD Candidate
Tunç DurmazYildiz Technical University, Associate Professor
*These individuals are signing for themselves, not on behalf of their universities/colleges.