This study systematically reviews the evolutionary trajectory of corporate sustainability research spanning from 1973 to 2019. Through a scientometric analysis of 26,111 Web of Science articles, it demonstrates the continuous development of the conceptual foundations of corporate sustainability, leading to changes in research subjects over time. Despite recent efforts to integrate sustainability into mainstream business models, there remains a lack of consensus on theoretical and methodological frameworks. The study aims to enhance understanding of the conceptual foundations of corporate sustainability by classifying 47 years of research into four major periods: the Dawn of Diverse Ideas (1979-2005), the Rise of Conceptual Frameworks (2006-2011), the Era of Heterogeneity (2012-2015), and the Age of Stakeholder Engagement (2016-2019). The analysis examines the leading research subjects, theories, and perceptions of corporate sustainability in each period, providing a comprehensive review of the evolution of sustainability research. Moreover, the study introduces emerging concepts in the latest sustainability research and underscores the significance of academic research in addressing the current challenges practitioners face.

Standards for sustainability have moved from this being an initiative of voluntary bodies like the Global Reporting Initiative and the Sustainability Accounting Standards Board to standards being developed by governments, such as the EU’s Corporate Sustainability Reporting Directive, and private sector initiatives whose standards have received government support, such as the IFRS Foundation’s International Sustainability Standards Board. Within the standard setting process a heated debate exists about whether these standards should be based simply on financial materiality (e.g., what matters to shareholders), so-called “single materiality,” or also impact materiality (e.g., the positive and negative externalities the company is creating in the world), so-called “double materiality.” This debate is an important one, but we think too much emphasis is being place on the extent to which companies reporting on their sustainability performance according to a set of standards can make the world a better place. Reporting transparency is simply the first step in a seven-step hierarchy of ways in which corporate behavior can be influenced. At the top of this hierarchy is corporate form as codified in company law, although changes in corporate behaviour are still influenced by the intervening steps.

The Securities and Exchange Commission (SEC) has a threefold mission: (1) protecting investors, (2) facilitating capital formation, and (3) maintaining fair, orderly, and efficient markets. Central to all three is that companies provide information on financially material risk and opportunities to their investors. This is specifically noted with respect to protecting investors, saying: “public companies, fund and asset managers, investment professionals, and other market participants to regularly disclose significant financial and other information so investors have the timely, accurate, and complete information they need to make confident and informed decisions about when or where to invest.” I argue that disclosure by companies of material ESG factors according to a set of standards is essential for investor protection. But first, it is necessary to distinguish between values-based investing, which is not based on financial materiality, and value-based investing, which is. Material ESG risk factors are pecuniary and fiduciary duty requires that these be taken into account. Through engagement with their shareholders, companies must then determine which ESG factors are material, and these vary by industry. The SASB/ISSB provides useful guidance here. Climate change is an existential challenge to America’s future prosperity and security. While it is typically portrayed in the media and in political messaging as a largely liberal priority, the challenges it presents are recognized by conservative executives, conservative politicians, conservative NGOs, conservative investors, and fossil fuel companies alike. The SEC has the statutory authority to issue a rule on climate risk disclosure, as the issue is material to investors, although I detail some suggestions for how the rule can be simplified and improved so as not to exceed the SEC’s statutory authority.

This paper investigates the role of the intensity and relevance of ESG materiality in equity returns. Adopting the classifications of materiality provided by the Sustainability Accounting Standards Board (SASB), the paper introduces the concept of the financial relevance and financial intensity of ESG materiality in order to estimate how it explains equity returns. The results of the analysis, based on a large sample of U.S. companies included in the Russell 3000 from January 2008 to July 2019 show that not only do ESG rating changes (ESG momentum) have a consistent impact on equity performance, but also that the market seems to reward more those companies operating in industries with a high level of concentration of ESG materiality. The implication is that the equity premium of listed companies is better explained by the concentration of material issues (i.e. the Gini index) than by the ESG momentum.

This paper sets out a logical and inclusive approach to measuring purpose. We advocate a three-stage process, the first of which anchors the purpose, mission and vision of the organisation in its governance. The second stage identifies the business metrics that derive from purpose in relation to inputs, outputs, outcomes and impacts. In the final stage, these reporting metrics are converted into monetary values through enterprise cost-based accounting and societal valuation. This three-step approach provides a coherent reporting framework against which critical decisions can be made. These decisions may be internal – enabling management to allocate scarce resources appropriately – or external, allowing investors and other critical stakeholders to assess the performance of a company against its stated purpose. We conclude by categorising existing measurement initiatives in relation to the three stages.

Practitioners and academics have been using different terms to describe investments in the sustainability context. The latest inflationary term is impact investments—investments that focus on real-world changes in terms of solving social challenges and/or mitigating ecological degradation. At the core of this definition is an emphasis on transformational changes. However, the term impact investment is often used interchangeably for any investment that incorporates environmental, social, and governance (ESG) aspects. In the latter instance, achieving transformational change is not the main purpose of such investments, which therefore carries the risk of impact washing (akin to “green washing”). To offer (re-)orientation from an academic perspective, we derive a new typology of sustainable investments. This typology delivers a precise definition of what impact investments are and what they should cover. As one central contribution, we propose distinguishing between impact-aligned investments and impact-generating investments. Based on these insights, we hope to lay the foundation for future research and debates in the field of impact investing by practitioners, policymakers, and academics alike.

This article uses the study of two environmental, social, and governance (ESG) data vendors—KLD and Innovest—to exemplify the “social origins of ESG issues” argument made by Eccles and Stroehle in their 2018 working paper “Exploring Social Origins in the Construction of ESG Measures.” Based on in-depth interviews with the organizations’ founders and historical document analysis, we recap the history of the cases and show how different origins, philosophies, and “purposes” of ESG issues shaped the methods and data characteristics of two of the most important data vendors of their time. We discuss why MSCI chose to continue with the financial value–oriented methodology of Innovest while discontinuing the values-driven KLD methodology. Through an in-depth literature analysis, we further show that not only the creation but also the use of “nonfinancial performance” concepts rely on processes of social construction. We also show that investors use different ESG data from those used by academics, potentially leading to misaligned narratives. Finally, with this article we join the call for more explicit contextualization of ESG data, highlighting that both practitioners and academics need to better understand the social construction that underlies analyses that use different concepts of ESG.

At the end of 2018, the Sustainability Accounting Standards Board (SASB) released the codified version of its standard that established measurement and reporting criteria for companies’ material environment, social, and governance (ESG) issues. By introducing the concept of financial relevance of materiality, we present an analysis of the quality of reporting of the companies that adopted SASB’s framework in their 2019 non-financial reports. While the number of companies reporting according to SASB’s standards is still small, our results are encouraging, showing, on average, good to very good quality of reporting.

The 17 UN Sustainable Development Goals (SDGs) have created a framework for environmental and social impacts, which institutional investors and corporations are using to guide resource allocation or highlight SDG-aligned investments already in place. We argue that the SDGs have clarified certain elements predominantly missing or implicit in many environmental, social, and governance (ESG) standards, specifically focusing on companies’ E and S externalities. Methodologically, we analyze how health care companies contribute to SDG 3 on health and well-being as a case, mapping the goal’s targets to the Sustainability Accounting Standard Board’s (SASB’s) 30 generic ESG issues and considering both financially material and immaterial ESG issues, based on SASB. Using an innovative data set, we highlight where private sector firms contribute to SDG impacts and where their financial priorities might lie. Where firms are either not contributing or perhaps unable to, we point to the need for public sector activities.

This study provides an overview of past, present, and future sustainability research with a specific focus on corporate sustainability and responsibility. We conduct a systematic review (i.e., scientometric analysis or science mapping) of 26,111 Web of Science articles on sustainability, environmental, social, and governance (ESG), and corporate social responsibility (CSR) published from 1973 through 2019. Our findings reveal how sustainability research has evolved to integrate ESG and sustainability into traditional business and investment models. We first provide an extensive review of how sustainability research has evolved to clarify the relationship between corporate sustainability and its impact. We classify Period 1: Dawn of Diverse Ideas (1979-2005), Period 2: Rise of Conceptual Frameworks (2006-2011), Period 3: Era of Heterogeneity (2012-2015), and Period 4: Age of Stakeholder Engagement (2016-2019), and discuss how drivers, strategies, and expected impacts of corporate sustainability have changed and how perspective changes have altered the research subject. We conclude with some personal observations regarding important issues in the practice of sustainability today from a capital market perspective, and raise the question of what future scientometric analysis will show about the relevance of research being done today for the issues practitioners are grappling with.

The primary factors driving the remarkable growth of private equity have been the industry's attractive and stable returns in combination with its active ownership model. Nevertheless, critics have been questioning whether the PE industry can maintain its historic returns, and challenging its fee and incentive structures as well as its notable lack of transparency and diversity. And the alleged systemic effects of the industry on social problems like income inequality and climate change have become large enough to create a perceived threat to PE's long‐term “license to operate.”In this article, the authors discuss the commitment of EQT, the publicly listed and Stockholm‐headquartered private markets firm (and eighth largest PE fundraiser in the world), to the “future‐proofing” of both its portfolio companies and the company itself. The company envisions itself as undertaking a “journey” toward sustainability and positive impact and, in so doing, furnishing a model that other PE firms might find useful in helping “future‐proof” the entire industry. As part of that commitment, EQT recently published a “Statement of Purpose” signed by its the board of directors that focuses a societal impact lens on its entire portfolio of companies and assets, reinforces its public commitments to diversity and other “clean and conscious” practices, and aims to leverage digital technologies to enhance financial returns and real‐world outcomes. Transparency and a mindset focused on achieving positive impact are the keys to PE's earning high and stable returns and to securing its long‐term license to operate.

Language used to describe processes related to environmental, social and governance (ESG) issues varies between organizations, leading to a lack of clarity in terms and failures of communication. A...

The first integrated reports were published in the early 2000’s by corporate pioneers determined to provide information that would improve their shareholders’ and stakeholders’ understanding of the company. The International Integrated Reporting Framework was released in December 2013 to provide organizations with guidance on the content of an integrated report. This paper explores that extent to which companies around the world are using the framework to prepare their reports and whether country-to-country differences exist in the content and quality of integrated reports. The authors selected five companies from each of the following countries: Brazil, France, Germany, Italy, Japan, The Netherlands, South Africa, South Korea, United Kingdom, and the United States for the study. A 0-3 scale was used to evaluate five areas of disclosure — Materiality, Risks and opportunities, Strategy and resource allocation, Performance, and Outlook. We found that countries could be fairly clearly grouped into three categories of qualities of disclosure: High (Germany, the Netherlands, and South Africa), Medium (France, Italy, South Korea, and the United Kingdom), and Low (Brazil, Japan, and the United States). We provide some preliminary views on the reasons for these differences.

Until relatively recently, climate change was the purview of corporate social responsibility departments, to the extent it was considered at all. Siloed from finance teams, senior management and the board, it was seen as a non-financial, ethical and purely environmental matter. A public position on climate was beneficial for reputational purposes only, with conventional wisdom that climate change could not affect the financial bottom line, let alone lead to circumstances sufficient to impose personal liabilities on directors or senior management. Yet this is no longer the case. Having reached global consensus in the Paris Agreement to keep the increase in global average temperature to ‘well below’ 2°C and to pursue efforts to limit it to 1.5°C, the world’s governments and private sector leaders are taking steps to deliver the required mitigation and adaptation measures. Advances in our understanding of the potential catastrophic impacts of climate change were brought to the fore in 2018 with the special report on the impacts of global warming of 1.5°C by the Intergovernmental Panel on Climate Change. In light of these and other developments, it is now widely understood that the impacts of climate change pose foreseeable, and often material, risks to the financial performance and prospects of companies. Some of the most devastating of these impacts will be felt beyond mainstream investment and business time horizons. The extent of these impacts on future generations are dependent on the near-term actions of our current generation, which we have little incentive to fix, making climate change a ‘tragedy of the horizon’. Yet many of the risks will arise within mainstream planning and investment horizons and are already materialising today: 2017 had the highest ever costs from global weather disasters, with almost two-thirds of the US$320 billion loss uninsured. Climate change is beginning to visibly disrupt business models across a range of sectors and geographies. This paper outlines why climate change is now a core corporate governance issue. Directors now need to add a base level of climate competency to their governance skill set, as is necessary to guide their companies through the physical impacts of climate change and the transition to the net-zero emissions economy set out in the goals of the Paris Agreement. And for most, if not all, directors climate competence is not optional; governance failures and misleading disclosures relating to climate change may be actionable against individuals and companies. Focusing on key common law jurisdictions, this paper shows that existing corporate and securities laws are conceptually capable of being applied to failures to govern and disclose climate risk. While there is generally a gap between the law on the books and its enforcement against directors, this paper argues that the climate change litigation gap is likely to close in the relatively near future. This has led to the development of a number of tools to assist boards and their committees to navigate the new governance and disclosure expectations and to take up the opportunities created by climate disruption on business.