War, Cacophony & Beyond: Reexamining and Adding Security to Environmental, Social & Corporate Governance Investing
Russia’s invasion of Ukraine has exposed the current ESG approach’s weakness in many ways, most noticeably in the form of real-world consequences of negative screening strategies against defense and energy sectors. This Note attributes this weakness to a cacophony of risk and impact—a conceptual conflation between the two concepts in the relatively nascent ESG space. However, this Note finds that, even after resolving this cacophony, ESG investing still has significant problems that challenge its efficacy: (1) insufficient fairness and reasonableness of ESG ratings; (2) its uncertain future viability as an effective investment methodology under unfavorable economic conditions; and (3) its decay into a public relations and marketing tool. Eschewing ESG investing and promoting impact investing instead is a solution worth considering, but implementation issues prevent it from becoming a large-scale alternative in the short-term. This Note argues that a better solution, albeit far from perfect, is the inclusion of security—defined as elements that support the United States and its allies’ security against adversarial forces—as a component of ESG’s ambiguous “S.” It could not only address ESG’s lack of responsiveness to geopolitical risks exposed by the Russo-Ukrainian War, but also accelerate the market and the public’s new and accurate understanding of ESG as a risk framework.
Seongjun “Spencer” Park*,
War, Cacophony & Beyond: Reexamining and Adding Security to Environmental, Social & Corporate Governance Investing,
46 Fordham Int'l L.J. 251
Available at: https://ir.lawnet.fordham.edu/ilj/vol46/iss2/3