ESG is not a distraction against climate action

ESG (environmental, social and governance) is not a distraction in the fight against climate change, Ioannis Ioannou, Associate Professor of Strategy and Entrepreneurship at London Business School (LBS), has said.

“It is calling ESG a distraction that is the real distraction. The underlying problem here is the failure of our governmental, national and international institutions to coordinate climate action.”

Dr Ioannou made the arguments at The New York Times’ recent Climate Forward London event. In an Oxford-style debate addressing the question, ‘Is ESG a Distraction from Climate Action?’, Dr Ioannou argued it was not.

“How could we possibly be distracted from a path we have never been on?” he said. “We’ve been holding Conferences of the Parties (COPs) since 1995, 10 whole years before the term ESG even appeared … We did nothing before, we did nothing afterwards. Carbon emissions have been steadily increasing. Since 1970 alone they have increased by about 90%. Therefore, the association between the emergence ESG and lack of climate action is completely spurious.

He continued: “ESG is not a distraction, ESG is merely a reflection. It reflects the unfolding moral, ethical, sociological processes and debates that are currently taking place. ESG is not only an issue of measurement or disclosure. The confusion around ESG actually reflects ongoing societal debates: about women’s rights, gay rights, racial discrimination, minority rights and so on. These are complex, multifaceted issues that are inherently socio-political. Society is currently polarized. How can we expect ESG to be accurate, trustworthy, reliable and comparable when society at large is still debating?"

Finally, Dr Ioannou argued that the real distraction from climate action is the weaponization of ESG by the political right based on an emerging, yet false, anti-ESG rhetoric. He pointed out that even ex-US Vice President Mike Pence had attacked the ESG agenda as a plot by the “woke” left to control corporate America in a recent Wall Street Journal op-ed.

“Let’s be clear, if the ESG agenda had indeed been a distraction, then the political right would have been the first ones to embrace it. It is precisely because the ESG agenda can have a positive impact, that the political right and vested interests are fighting so viciously against it,” Dr Ioannou said.

Watch the full debate online.