Doing good or Sounding Good: A Skeptical Look at ESG!

Aswath Damodaran
Aswath Damodaran
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Published 2020-09-21
In the last decade, there has been a push to make companies into better corporate citizens, cognizant of their societal obligations. That push has led to measures of corporate goodness, with ESG (Environmental, Social and Governance) indicators being used to judge how companies measure up. The advocates for ESG have won over many in the establishment, with CEOs and institutional investors, all buying in, and their sales pitch has been alluring. ESG, they have argued, will be all things good for everyone involved: good companies become more profitable and valuable, investors in these companies will be enriched and society will benefit. At the risk of being labeled as morally deficient, I believe that ESG has been overhyped and oversold, and that many of the claims made about its value are debatable, internally inconsistent or questionable. I also believe that, unless we have an open debate about what ESG can and cannot do for companies, investors and society, a lot of money will be spent on ESG, a few people (consultants, ESG experts, ESG measurers) will benefit, but companies will not be any more socially responsible than they were before ESG entered the business lexicon.
Slides: www.stern.nyu.edu/~adamodar/pdfiles/blog/ESG.pdf
Paper (with Brad Cornell): papers.ssrn.com/sol3/papers.cfm?abstract_id=355743…
All Comments (21)
  • @siddhantmaheshwari9399
    Hello sir, I am a 12th grade student from Ahmedabad , India. I have been watching your videos and learning from them, for over 5 months now! I am applying ED to NYU Stern ! I wish I get accepted and get to meet you in person and attend your Lectures. Your valueable insights through this platform, have enhanced my passion for finance. Thank you for all of it!
  • @TGGWarehouse
    The way ESG is pushed is very little different to how Christian missionaries used to (and still do albeit on a lesser scale) spread the "Word of the Lord" in "heathen" countries. I used to blindly believe people who loudly banged the ESG drums. It does sound good and makes me wanna join the dance, the intentions are definitely noble. The implementation however, as so often is the problem with humanity because of our impatience, is skewed. This is a brilliant video, as always 😊 thank you for continuously sharing wise knowledge for free!
  • @robertshore6742
    Very insightful, many thanks for taking the time to post these videos Professor.
  • @kerrinnaude2777
    One of your most elucidating videos. I have been trying to get my thoughts in line as to why it seemed suspect from so many angles, but you laid out a great approach. Thanks Professor
  • @user-dr.prashant
    Awesome that's called awareness 😘😘😘😘
  • @kubilaycamurdan8863
    I really like the way that the Professor always become the voice of common sense.
  • @jamesbyrne9312
    Great talk..I will say that relative value placed on different companies relating to each persons opinion is not new. The price of gold for instance depends on sentiment etc. But that doesn't mean we shouldn't keep trying to do good things through ESG.
  • @roberthammer2335
    Great analysis. Thank you for tackling this hotly debated topic. I very much appreciate the insight.
  • @sak079
    Thankyou Professor Damodaran. I am interested in reading some of the studies you mentioned under "Constrained Optimal" as it relates to ESG - any recommendations on good papers to start reading on this?
  • @simonboland
    Should be required viewing for any politician or company executive.
  • @RajVaswaniRox
    Loved your take, your conclusion got me thinking deep.