Environmental, social and corporate governance

Environmental, social and governance (ESG) refers to the three central factors in measuring the sustainability and ethical impact of an investment in a company or business.

Historical decisions of where financial assets would be placed were based on various criteria, financial return being predominant. However, there have always been plenty of other criteria for deciding where to place your money – from Political considerations to Heavenly Reward. It was in the 1950s and 60s that the vast pension funds managed by the Trades Unions recognised the opportunity to affect the wider social environment using their capital assets - in the United States the International Brotherhood of Electrical Workers invested their not inconsiderable capital in developing affordable housing projects, whilst the United Mine Workers invested in health facilities.

In the 1970s, the worldwide abhorrence of the apartheid regime in South Africa led to one of the most renowned examples of selective disinvestment along ethical lines. As a response to a growing call for sanctions against the regime, the Reverend Leon Sullivan, a board member of General Motors in the United States drew up a Code of Conduct in 1971 for practising business with South Africa. What became known as the Sullivan Principles attracted a great deal of attention and several reports were commissioned by the government, to examine how many US companies were investing in South African companies that were contravening the Sullivan Code. The conclusions of the reports led to a mass disinvestment by the US from many South African companies. The resulting pressure applied to the South African regime by its business community added great weight to the growing impetus for the system of apartheid to be abandoned.

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