Investors need better ways to find companies making a difference

By Sarah Labowitz and Casey O'Connor

With intention and collaboration, investors can soon have the tools necessary to identify and reward forward-looking companies that are helping to create a sustainable economy.

Environmental, social and governance (ESG) business challenges increasingly are on the agenda for mainstream investors. Many attribute this shift to a rising demand from millennials and women, both groups that are more likely to seek investments consistent with their values. 

Traditional financial institutions and consultants have been quick to respond with products and services ranging from targeted company or industry research to broader ESG-focused ratings and indices. But to date, there is little agreement on what ESG really means. Nowhere is this more pronounced than in the measurement of social issues, the labor and human rights component of this puzzle. As a result, investors still lack the tools they need to identify companies that are leading the way on social issues.

In a newly released study, we find that while social measurement initiatives abound, none sufficiently evaluate what matters most: outcomes and performance. Instead the majority assess whether companies have social policies and governance structures in place, most often with little or no examination of whether these efforts have the intended effect. This, combined with the lack of agreed-upon social standards, has resulted in a costly and complex landscape of measurements that fails to deliver meaningful, comparable data about company performance on human rights.

Read full article as published by MarketWatch.

Sarah Labowitz is co-director of the Center for Business and Human Rights and a Research Scholar. Casey O'Connor is a Sani Fellow at the Center for Business and Human Rights, focusing on sustainable investment research.