Investment Stewardship for Positive Societal Impact

Companies are increasingly addressing environmental, social and governance (ESG) factors as part of strategic and operating decisions. Firms that perform better in some of those factors subsequently have better financial performance.

 However, there are limits to how much individual companies can accomplish in achieving progress toward environmental, social and governance goals.

Companies that devote resources to certain environmental, social and governance factors may be at a short-term competitive disadvantage to competitors that do not. Collaboration within industries on sustainability issues can alleviate that disadvantage.

This paper proposes that large investors, including index funds, active managers and pension funds can act as “stewards of the commons” by helping build and sustain industry and more broadly systems-level collaborations for ESG issues.