ESG: What About The S and the G?

Diana Ribeiro Duarte, Pedro Capitão Barbosa and Inês Meneses Lampreia sign the article "ESG: E O S e o G?", published in the digital platform Lexology.

" Contradictions of the ESG - where are the S and the G going?

Asset managers and other players in the financial industry are quick to reap the benefits of offering "green" investment opportunities. However, venturing into the maze of ESG compliance has proven to be somewhat of a struggle: in fact, the main reason behind the complexity of ESG lies in how contradictory the adoption of ESG criteria and the natural trade-offs that occur in the pursuit of ESG objectives can be.

Case in point: in the article "ESGs should be reduced to one simple measure: emissions" (21 July 2022), Mark Harris, writing for the Economist, offers great examples of ESG contradictions. For example, while closing a coal mine can help reduce emissions and mitigate climate change, it can also harm the workers and suppliers who depend on it for their livelihoods.

The article highlights the need for a simple and effective approach to ESG, suggesting that rather than trying to consider multiple ESG factors, investors should focus on just one ESG factor - emissions. While the article acknowledges that emissions are not the only ESG factor that investors should consider when making sustainable investments, it argues that they should be given greater weight in investment decisions, suggesting that investors can use emissions data to compare companies within the same industry and identify leaders and laggards in terms of environmental performance. (...)"

Click here to read the article.