![]() And I’d argue those are inequality and climate change. So on the margins, I think CEOs can do something and stakeholder capitalism has some relevance, but it’s not something we can rely on for society’s most important challenges. ![]() The problem with ESG, as you could see in the last number of years, is it grows alongside inequality and carbon emissions and all the things that it’s meant to address. To the extent that companies can do things on the margin under the guise of ESG, which I think is definitely possible, in some form they probably have been doing that for decades. And if there’s no one telling you and actually validating what it means to be green, or to be sustainable, then you have a race to the bottom where every company and every participant wants to say they are doing it. I would say that whatever they’re doing has to serve some purpose of the business and add shareholder value, otherwise, they really wouldn’t be doing it. Companies will say that they’re doing stuff - I don’t call them liars. From inside BlackRock, what’s the difference between the message that corporations are sending about ESG and what you think is actually happening?Ī: I think the fundamental challenge is that even if corporations want to do that they can’t because the system is structured in a way to maximize profits and very often maximizing profits means doing something that is not good for society, including contributing to climate change. Q: But during your tenure at BlackRock, lots of investors started to seek out funds or companies that claim to have an Environment Sustainability and Governance or ESG focus. And so rules are designed to give clarity, I think, to a competitive match. If you allow LeBron James to punch someone in the face, and then do a layup, he’s gonna do it. Q: In your essay, you draw a whole analogy to basketball, and how the stars basically learn to thrive under the rules of the game as they are enforced.Ī: That’s exactly right. The challenge is that when profit and purpose don’t overlap, and when maximizing profit can mean something that is not good for society, whether it’s polluting, underpaying or exploiting workers, then those are the kind of systemic issues that only government can adjust the rules to solve. When the public interest aligns with profits, that’s great: Apple doesn’t need anyone to tell it to keep building better iPhones because it’s in their profit motive to do so and it also serves society’s interests because we get innovation and better products. In general, that means they have fiduciary obligations to focus on something specific, creating economic value rather than social value. I think the problem is the system is built through a chain of transactions where people are managing and spending other people’s money. Article contentĪ: That’s really it, right? I don’t actually cast aspersions on any CEO or any individual for operating the way they do. This advertisement has not loaded yet, but your article continues below.
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