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2023 | OriginalPaper | Buchkapitel

1. ESG: Global Importance, Origins, and Emergence

verfasst von : Karamo NM Sonko, Mariama Sonko

Erschienen in: Demystifying Environmental, Social and Governance (ESG)

Verlag: Springer International Publishing

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This chapter introduces ESG, defines it, outlines its evolution, and clarifies misunderstandings with regard to the topic. It reviews the literature, caused for its rapid rise and carries out an extensive survey of related concepts and activities in different parts of the world. The complex web around the topic is unravelled and the reader is taken on the journey of sustainability which leads to Africa through the rest of the book.

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“How Your Company Should Embrace Environmental, Social and Governance Issues,” Forbes, November 21, 2018.
Brown Brothers Harrison, 2020 Global ETF Investor Survey. ETFs Continue to Chart a New Path. New York, 2020.
Nina Chestney, “Green Bond Issuance Hit Record $255 Billion Last Year, Research Shows,” Reuters, January 16, 2020.
See Chapter 3 for a mathematical analysis with specific regard to the environment and equity within the context of ESG.
For an extensive list of such scandals and a succinct analysis See Karamo Sonko, “Scandals Bedevil US Corporate Leadership,” by Sonko, Dr. Karamo, African Business, March 2003.
London Stock Exchange Group (LSEG), Revealing the Full Picture: Your Guide to ESG Reporting. Guidance for Issuers on the Integration of ESG into Investor Reporting and Communication, 2020, p. 18.
The other principles are:
  • Principle 2: We will be active owners and incorporate ESG issues into our ownership policies and practices.
  • Principle 3: We will seek appropriate disclosure on ESG issues by the entities in which we invest.
  • Principle 4: We will promote acceptance and implementation of the Principles within the investment industry.
  • Principle 5: We will work together to enhance our effectiveness in implementing the Principles.
  • Principle 6: We will each report on our activities and progress towards implementing the Principles. https://​www.​unpri.​org/​pri/​what-are-the-principles-for-responsible-investment.
The Global Sustainable Investment Alliance (GSIA), The Global Sustainable Investment Review 2020. Brussels, Belgium, 2020. See http://​www.​gsi-alliance.​org/​wp-content/​uploads/​2021/​08/​GSIR-20201.​pdf and http://​www.​gsi-alliance.​org/​wp-content/​uploads/​2021/​08/​GSIR-20201.​pdf.
Daily Maverick on September 28, 2018.
Blaine Townsend, “From SRI to ESG: The Origins of Socially Responsible and Sustainable Investing,” The Journal of Impact and ESG Investing, Vol. 1, No. 1 (Fall 2020): 10–25.
The United Nations Environment Programme (UNEP) FI Asset Management Working Group (AMWG) invited Freshfields Bruckhaus Deringer law firm to assess whether institutional investors, such as pension funds and insurance companies, are legally permitted to integrate ESG into their investment decision-making processes. The Freshfield Report documents their findings after examining the legal framework of these institutions in Australia, Canada, France, Germany, Italy, Japan, Spain, the United Kingdom, and the United States. See A Legal Framework for the Integration of Environmental, Social and Governance Issues into Institutional Investment. London: Freshfields Bruckhaus Deringer, 2005.
The latter was an initiative of the UN Secretary General and UN Global Compact in cooperation with the Swiss government in 2004, endorsed by 23 financial institutions with total assets of over US$6 trillion. See IFC Advisory Services in Environmental and Social Sustainability, Who Cares Wins, 2004–08, Issue Brief 2004. https://​www.​ifc.​org/​wps/​wcm/​connect/​9eeb7982-3705-407a-a631-586b31dab000/​IFC_​Breif_​whocares_​online.​pdf?​MOD=​AJPERES&​CACHEID=​ROOTWORKSPACE-9eeb7982-3705-407a-a631-586b31dab000-jkD12B5#:​~:​text=​Who%20​Cares%20​Wins%20​(WCW)%20​was,US%246%20​trillion%20​in%20​assets.
Cited above in footnote 14.
Betsy Atkins, “Demystifying ESG: Its History & Current Status,” Forbes, June 8, 2020.
Georg Inderst and Fiona Stewart, Incorporating Environmental, Social and Governance (ESG) Factors into Fixed Income Investment. World Bank Group, 2018, p. 1.
Karamo N. M. Sonko, and Mariama Sonko, “Promoting Islamic Finance in Africa: Top–Bottom or Bottom-Up? A Case of Islamic Banking in the Gambia,” in Islamic Finance as a Closed System: New Insights, ed. Haider A. Khan, and Karamo N. M. Sonko. Lanham, MD: Lexington Books, 2020.
For further information on Islamic finance see Haider A. Khan, and Karamo N. M. Sonko, Islamic Finance as a Closed System: New Insights. Lanham, MD: Lexington Books, 2020.
This was the first UN conference to make the environment a global concern. It resulted in a set of adopted environmental principles and resolutions, including the Stockholm Declaration and Action Plan for the Human Environment.
For example, TI has UNESCO Consultative Status, is a member of the United Nations Global Compact and is closely associated with the United Nations Sustainable Development Group (UNSDG).
The Ten Principles are derived from: the Universal Declaration of Human Rights, the International Labour Organization’s Declaration on Fundamental Principles and Rights at Work, the Rio Declaration on Environment and Development, and the United Nations Convention Against Corruption. For the list visit https://​www.​unglobalcompact.​org/​what-is-gc/​mission/​principles.
For studies on the UN-NGO relationships, which are sometimes stormy, depending on the kind of NGO, the interested reader may refer to: P. Willets (ed.), The Consciences of the World: The Influence of Non-Governmental Organizations in the UN System. London: Hurst, 1996; T. Princen, and M. Finger (eds.), Environmental NGOs in World Politics: Linking the Global and the Local. London: Routledge, 1994; M. Rech, and K. Sikkink, Activists Without Borders: Advocacy Networks in International Politics. Ithaca, NY: Cornell University Press, 1998; Bas Arts, Math Noortmann, and Rob Reinalda (eds.), Non-State Actors in International Relations. Aldershot: Ashgate, 2001; and William De Mars, NGOs and Transnational Networks. London: Pluto Press, 2005. For a collection of papers on the theories, roles, potential, and limits of NGOs in development, see for example, Paul Samuel, and Arturo Israel (ed.), Nongovernmental Organizations and the World Bank Cooperation for Development. Washington, DC: The World Bank, 1991.
Klaus Schwab, and Peter Vanham, Stakeholder Capitalism: A Global Economy that Works for Progress, People and Planet. Hoboken, NJ, 2021.
For a complete report of these see World Economic Forum in collaboration with Deloitte, EY, KPMG and PwC, Toward Common Metrics and Consistent Reporting of Sustainable Value Creation. Davos, Switzerland, January 2020.
Stakeholder Capitalism was published on 27 January 2021. The authors carried out a number of country case studies and concluded that stakeholder capitalism is akin to the Living Standard Framework of the New Zealand government. This seeks to achieve the different aspects of the well-being of citizens in the short and long term, including distributional issues and resilience and are in harmony with the metrics of stakeholder capitalism. For more information on this Framework see https://​www.​treasury.​govt.​nz/​information-and-services/​nz-economy/​higher-living-standards/​our-living-standards-framework.
Jean-François Gagnon, with Martin Leroux, Alain Deschênes and Aida Chakri as contributors, “The Rise of ESG Investing,” Canadian Asset Manager ESG Survey Report. Ernst & Young Canada, March 31, 2021.
Helen Wyatt, “Sustainable Finance: The Rise and Rise of ESG,” Lexology, June 11, 2021.
Robert Kell, “The Remarkable Rise of ESG,” Forbes, July 11, 2018.
Nasdaq 2019 Sustainability Report, p. 6.
London Stock Exchange Group, Revealing the full picture: Your guide to ESG reporting, London, 2020.
Robert G. Eccles, and Svetlana Klimenko, “The Investor Revolution,” Harvard Business Review (May–June 2019).
According to the IMF, 1 United States Dollar equals 18.70 South African Rand, https://​www.​imf.​org/​external/​np/​fin/​data/​rms_​rep.​aspx.
Such partnership helps avoid the type of potential conflict that is brewing between some private corporations and governments, because of arbitration claims by the latter using investment treaties which “often result in large payouts, sometimes of billions of dollars, to these companies for alleged lost profits. These suits pose an immediate danger to the ability of developing nations, and the global community as a whole, to confront the COVID-19 challenge”. Therefore, under the auspices of the Columbia Center on Sustainable Investment and partner organizations, Phil Bloomer, Juan Pablo Bohoslavsky, Carlos Correa, Olivier De Schutter, Kerry Kennedy, Jeffrey D. Sachs, and María Fernanda Espinosa Garcés called “for a complete moratorium on all ISDS (investor-state cases) claims until the pandemic has passed and governments have agreed on principles to ensure that future arbitration cases will not hinder countries' good faith recovery efforts. These principles should recognize the full and clear scope that governments have, and are required, to take all appropriate actions to save lives and fight global emergencies, even when the result is a loss of profits or business opportunities, including by foreign investors”. For more information see http://​ccsi.​columbia.​edu/​2020/​05/​05/​isds-moratorium-during-covid-19/​?​utm_​source=​CCSI+Mailing+Lis​t&​utm_​campaign=​3dca9f0160-GRASFI+2020+Movi​ng+Online_​COPY_​02&​utm_​medium=​email&​utm_​term=​0_​a61bf1d34a-3dca9f0160-62904933.
Millennials (also referred to as Generation Y or Gen Y), are the demographic cohort born between the early 1980s and the early 2000s. Generation Z (or Gen Z) are commonly used for those born between the mid-1990s and the early 2010s. The generational boundaries are not rigid or agreed upon by all. See, for example, Michael Dimock, Defining Generations: Where Millennials End and Generation Z Begins. Pew Research Centre, January 17, 2019.
Also refer to Emily Zulz, “ESG Bigger in Europe Than in US,” ThinkAdvisor Newsletters, November 1, 2017; Andrew Holt, “ESG Investing Is More Popular in Europe Than the US,” IR Magazine, Augest 14, 2018; Joe McGrath, “ESG’s Failed U.S. Invasion,” Institutional Investor, January 28, 2018; and Emily Holbrook, “Data Shows Broad Differences in ESG Reporting Between Europe and the US,” Environment and Energy Leader, June 10, 2021; and David Robinson, “US Lags Europe on Regulation of ESG Investing,” Expert Investor, June 3, 2019.
Refer to LSEG (ibid.).
Anthony Duggan and David Goatman, “ESG Is Set to Be the Biggest Investment Driver in Africa in 2021,” Knight Frank The Intelligence Lab Global property market insight, April 7, 2021.
The closest book we find on comprehensive ESG reporting is John Hill, Environmental, Social, and Governance (ESG) Investing: A Balanced Analysis of the Theory and Practice of a Sustainable Portfolio. Academic Press, 1st edition, 2020.
These are: (1) Agata Stachowicz-Stanush (ed.), Corporate Social Performance in the Age of Irresponsibility-Cross National Perspective. Information Age Publishing, Inc, 2017; (2) Stephen Vertigans, Samuel Idowu, and René Schmidpeter (eds.), Corporate Social Responsibility in Sub-Saharan Africa: Sustainable Development in Its Embryonic Form. Springer, 2016; (3) Ivan K. Mugabi, and Irene Raletsebe, “Corporate Social Responsibility in Africa: Case Study of Botswana: Botswana Companies and Global Reporting Initiative (GRI) as a Model for Sustainable Reporting,” Lap Lambert (2017); (5) Moses Kibe Kihiko, The African Corporate Jungle: Engaging Corporate Social Responsibility. CreateSpace Independent Publishing Platform, 2010; (6) Nathan Andrews, and J. Andrew Grant (eds.), Corporate Social Responsibility and Canada's Role in Africa's Extractive Sectors. University of Toronto Press, 2020; and (7) Edward Mungai, Impact Investing in Africa: A Guide to Sustainability for Investors, Institutions, and Entrepreneurs. Palgrave Macmillan, 2018.
M. Ahmed, P. F. Fashagba, and F. I. Olamide, “Effect of Environmental, Social and Governance on Corporate Performance of Listed Manufacturing’s Firms in Nigeria,” Federal Polytechnic Bida, Niger State, Undated.
ESG: Global Importance, Origins, and Emergence
verfasst von
Karamo NM Sonko
Mariama Sonko