dissertation on esg

Empirical Analysis of ESG and Financial Performance

Student thesis : Master thesis

Globally, investors and financial markets are directing increasingly more attention towards responsible investments. The term “responsible investing” is often interpreted as environmental, social and governance (ESG) concerns for investment decisions with a long-term perspective. The concept has become increasingly more relevant among consumers, government, investors and stakeholders. The increased focus is not based on empirically superior relationships between risk and return, but rather on a shift in demand for responsible investments with a more long-term perspective. Previous studies focusing on the relationship between ESG and financial performance are split into three distinctions; positive, neutral and a negative relationship. These three counterparts find theoretical arguments and statistical evidence supporting their results, and a clear conclusion regarding the relationship is yet to be made. This thesis examines the relationship that has puzzled the academia, with a thorough and critical review of existing literature on ESG investing. The empirical analysis examines portfolios with varying degrees of ESG performance, where the performance has been identified by the companies’ respective ESG and controversy score. These numbers are provided by Refinitiv, which is the successor of Asset 4, and are collected through Thomson Reuters Datastream. By application of traditional asset pricing models, namely the CAPM, Fama & French three-factor, Carhart four-factor and Fama & French five-factor model, the return on various portfolios has been controlled against known risk factors. Moreover, both ESG and controversy factors have been developed to study the relationships in greater depth. The results find evidence that implies a negative relationship between high ESG scores and excess returns. However, this result is not evident in the robustness tests, where the portfolios are divided into sub-periods and classified into different portfolio sizes. In contrary to previous findings, the analysis finds evidence that the companies with the absolute lowest ESG scores have a negative excess return. Nevertheless, the negative alpha is not substantially different from zero. There is no evidence in the analysis that can provide an answer to the question of whether or not controversies have any effect on the excess return. The results are more supportive of the literature that implies a negative correlation between increased ESG initiatives and financial performance measured by excess returns. However, the question of whether ESG is priced in by the financial market remains open for further investigation.

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Corporate Social Responsibility: the institutionalization of ESG

Anderson, Erika (2023) Corporate Social Responsibility: the institutionalization of ESG. PhD thesis, University of Glasgow.

Understanding the impact of Corporate Social Responsibility (CSR) on firm performance as it relates to industries reliant on technological innovation is a complex and perpetually evolving challenge. To thoroughly investigate this topic, this dissertation will adopt an economics-based structure to address three primary hypotheses. This structure allows for each hypothesis to essentially be a standalone empirical paper, unified by an overall analysis of the nature of impact that ESG has on firm performance. The first hypothesis explores the evolution of CSR to the modern quantified iteration of ESG has led to the institutionalization and standardization of the CSR concept. The second hypothesis fills gaps in existing literature testing the relationship between firm performance and ESG by finding that the relationship is significantly positive in long-term, strategic metrics (ROA and ROIC) and that there is no correlation in short-term metrics (ROE and ROS). Finally, the third hypothesis states that if a firm has a long-term strategic ESG plan, as proxied by the publication of CSR reports, then it is more resilience to damage from controversies. This is supported by the finding that pro-ESG firms consistently fared better than their counterparts in both financial and ESG performance, even in the event of a controversy. However, firms with consistent reporting are also held to a higher standard than their nonreporting peers, suggesting a higher risk and higher reward dynamic. These findings support the theory of good management, in that long-term strategic planning is both immediately economically beneficial and serves as a means of risk management and social impact mitigation. Overall, this contributes to the literature by fillings gaps in the nature of impact that ESG has on firm performance, particularly from a management perspective.

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Despite Anti-ESG Attacks, New Study Shows Investors See Climate as Critical to Business Performance

Sponsor content from Maslansky+Partners.

By Michael Maslansky and Will Howard

In February, a group of major financial services firms withdrew from Climate Action 100+, a coalition of investors pushing companies to cut carbon emissions.

It was just the latest response to a conservative backlash against corporate environmental, social, and governance (ESG) policies. In a year that saw billions in net outflows from ESG-related investments, more than 100 attempts to pass anti-ESG legislation around the U.S. (which largely failed), and countless articles prematurely writing ESG’s obituary, a new caution around ESG may have seemed like a reasonable response.

But many of these organizations overlooked a key question: What do investors want?

Do investors care whether financial services firms take climate-related actions such as reducing their climate impact, mitigating their climate risks, or investing in clean energy opportunities? Does clean energy represent a significant growth opportunity for asset managers? Are climate risks material to evaluating investments?

The answer to each of these questions is a resounding yes . Recent research among affluent and high-net-worth individual investors shows that while financial services companies and asset managers must be mindful that certain actions—and certain language used to communicate these actions—carry the risk of partisan backlash, they should not let these risks overshadow investors’ clear expectations about climate action and the potential of clean energy. This research showed the following:

• Investors believe publicly held financial services companies have a responsibility to take a range of climate-related actions.

• They feel investments related to the clean energy transition will outperform most other sectors and earn investors money in the short and long term.

• They recognize that climate risks are significant business risks that, if ignored, could hurt the financial performance of companies and investment portfolios.

Partisan Differences, Overall Consensus

Investors agree across party lines that companies should avoid political advocacy and focus on business.

According to our recent survey of 1,000 affluent and high-net-worth individual investors in the U.S., two out of three investors—the same ratio as among the general population—believe it is inappropriate for companies to “take stances on political issues.” And half of investors believe that when financial services companies “take action on climate,” they are indeed “taking a political stance.”

Not surprisingly, the line between what is or is not political depends on your politics.

We tested a range of 34 climate-related actions a financial services company might take, including efforts to reduce impact on the environment, improve performance by investing in climate-related investments, and mitigate business risks from a changing climate. Republicans were significantly less likely than Democrats—by an average of 30 percentage points—to expect financial services companies to take action, to believe climate investments will outperform other investments, and to see climate risk as material.

But these differences mask the more important reality: regardless of party, investors think companies that focus more on climate and clean energy will be more successful.

Across those 34 climate-related actions, investors preferred the pro-climate position by an average of 4:1 (60% to 15%). Even among Republican investors, the average response favored the pro-climate position by 5:3 (45% to 27%). On every action we tested, we saw more support than opposition.

Yes, climate can be political, and yes, there is a partisan gap. But most investors now clearly associate climate action and the clean energy transition more closely with business performance than with political advocacy.

Three Investor Insights on Climate

1. Investors believe environmentally responsible business is good business.

Much criticism of ESG and sustainable investing argues that investors have to choose between performance and impact. By overwhelming margins, investors reject this conclusion.

Nearly all investors (88%) believe that companies considered “responsible businesses” are viewed as more likely to care about the environment than other businesses and more likely to succeed financially, according to our survey. And critically, three out of four investors (77%)—including 61% of Republicans—explicitly believe that “environmentally responsible companies are more likely to succeed financially.”

2. Investors believe the clean energy transition is a growth opportunity.

Environmental responsibility is increasingly associated with positive financial returns. Our research showed that 70% of investors believe “there is a lot of money to be made in the clean energy transition.”

Some 65% of investors expect “clean energy technology” to outperform the market over the next year. And they believe that over the next decade, it is more likely to outperform the market than any sector except artificial intelligence.

For investors, the future is clean: nearly 80% believe that “publicly held financial services companies that invest in the clean energy transition are more likely to succeed financially.”

3. Investors believe climate risk is a business risk.

Investors also recognize that a changing climate increasingly poses significant risks to business and investment performance.

The survey indicates that 60% of investors believe climate change can affect the performance of publicly held financial services companies. And 82%, including 69% of Republicans, believe that “publicly held financial services companies that better anticipate environmental risks are more likely to succeed financially.”

The ‘ROR’ of Climate Investing

As many companies evaluate their commitments and communication on climate, they should heed investor perspectives. Partisan gaps exist, but investors agree that clean energy technologies and climate risk mitigation are good for business. Despite negative headlines, investor consensus strongly favors companies willing to lead on the clean energy transition.

Companies can navigate political risks by sticking to “ROR”: connecting their climate actions to being a responsible business, to the growth opportunities of the clean energy transition, and to the tangible climate risks that can affect business performance.

Learn more from maslansky+partners about how investors view climate action.

Michael Maslansky is the CEO of maslansky+partners, a language strategy consultancy, and the author of The Language of Trust: Selling Ideas in a World of Skeptics .

Will Howard is a senior vice president with maslansky+partners.

Methodology: Research was conducted online with a representative sample of 1,000 investors across the U.S. All participants had investable assets greater than $150,000 outside their primary residence; 55% had assets greater than $500,000; and 25% had investable assets greater than $1,000,000 .

Georgetown Law

A brief look at the implications of artificial intelligence on esg.

August 7, 2024 by Guest Post from Corey Mirman (L'24)

In part 2 of his examination of ESG principles, Corey Mirman (L'24) considers the potential impact of AI technologies on both ESG investing and the movement overall in this student guest post.

Artificial intelligence (AI) has been hailed as a positive tool that could make humans more productive and happier because of its potential to complete mundane tasks in a matter of seconds, and at the same time, as something that could spell the end of the human race. [1] Either way, the rapidly growing use of AI creates profound legal, moral, and practical implications for the environmental, social, and governance (ESG) movement. This paper will discuss some of these implications for each of the E, S, and G in ESG, as well as the potential impact of AI on ESG investing.

Environmental Implications

The E in ESG typically refers to “[c]limate change, resource efficiency, pollution and waste management, biodiversity, and energy consumption.” [2] AI has the potential to create solutions for managing these issues—it can analyze electricity demand to “optimize the operation of renewable energy sources like wind and solar power” and “provide more accurate and detailed climate predictions.” [3] But at the same time, AI applications consume massive amounts of electricity—by 2027, global AI servers could potentially consume about as much electricity as “Argentina, the Netherlands and Sweden each use in a year.” [4] In fact, many markets across the U.S. are at risk of running out of power. [5] “Northern Virginia [the data center capital of the world] needs the equivalent of several large nuclear power plants to serve all the new data centers planned and under construction. Texas, where electricity shortages are already routine on hot summer days, faces the same dilemma.” [6] Cooling AI servers also requires significant water consumption. [7] As a result, it is unlikely that the environmental benefits of AI will keep up with its electricity and water demands. [8] Even Sam Altman of OpenAI has said that a technological breakthrough is needed to keep up with AI’s energy use. [9]

AI’s massive energy consumption also raises questions about how big companies that have made zero-emissions pledges will meet their goals while still expanding their AI products and services. [10] These companies will have to find ways to make their data centers more energy efficient, accept that they will not meet their net-zero goals, or run the risk of being accused of greenwashing. But while making data centers more efficient will be expensive, and thus impact shareholder returns, doing so is not a purely “woke” ESG activity. In fact, given the limited supply of power, companies likely have a fiduciary duty to make their AI operations more energy efficient. “Settled law permits corporations and institutional investors to take into account ESG factors that are rationally related to the profitability of their businesses and investments, and if those factors are obviously relevant as a matter of business and investment risk, may require consideration of those factors as a matter of fiduciary duty.” [11] The country running out of power, threatening the continued innovation of AI businesses poses a clear business risk to these businesses. They must act to make their operations more energy efficient.

Finally, while the anti-ESG movement has pushed back on many climate-change-related regulations, slowing down the explosive data center growth seems to have at least some bipartisan support—“[t]he top leaders of Georgia’s House and Senate, both Republicans, are championing a pause in data center incentives,” for example. [12]

Social Implications

The S in ESG typically refers to “[l]abor practices, human rights, community engagement, diversity and inclusion, and employee well-being.” [13] A major social implication of AI is its potential to eliminate jobs. [14] Business Roundtable’s 2019 Statement on the Purpose of a Corporation stated that its CEO signees were committed to “[i]nvesting in our employees. This starts with compensating them fairly and providing important benefits. It also includes supporting them through training and education that help develop new skills for a rapidly changing world. We foster diversity and inclusion, dignity and respect.” Do the companies that signed this statement (and other companies) have an obligation to protect jobs from the threat of technology like AI? Or do they have an obligation to train their employees to use AI (i.e., develop skills for a rapidly changing world)? Or is their only obligation to maximize shareholder returns, in which case, is their duty to use AI to eliminate jobs to save costs and improve profit margins?

“[U]nder Delaware law, if the board believes that action benefiting stakeholders like workers or creditors has a rational relationship to the best interests of the stockholders, the business judgment rule protects the board from stockholders seeking to overturn their judgment in litigation.” [15] One could argue that using AI to eliminate a significant number of jobs poses a reputational risk that would be damaging enough to a company to warrant keeping human employees. Still, companies likely have no obligation to maintain human employment unless they are barred from doing so by union labor contracts—companies lay off employees all the time despite the reputational risks. Ultimately, the efficiencies gained from increasing AI adoption will likely outweigh any reputational risks, but companies that are serious about ESG efforts should put in place policies regarding job automation. They also must ensure they are in compliance with federal and state Worker Adjustment and Retraining Notification (WARN) laws and ensure that layoffs do not “disproportionately impact a protected group and lack sufficient business justification.” [16]

Employers using AI tools to evaluate prospective employees must also ensure that they are in compliance with existing employment laws such as Title VII of the Civil Rights Act and the Americans With Disabilities Act, as well as recent state and local AI-specific regulations like “New York City Local Law 144, which sets forth limitations and requirements for employers using automated employment decision tools (AEDTs) to screen candidates for hire or promotion.” [17]

Governance Implications

The G in ESG typically refers to “[b]oard structure, executive compensation, transparency, anti-corruption measures, and risk management.” [18] Some AI scholars have posited a thought experiment that suggests that if humans tell an AI application to make as many paperclips as possible, without human intervention or sufficient controls, the application will “end up taking over every natural resource and wiping out humanity just to achieve its goal of creating more and more paperclips.” [19] While this seems fantastical (and impractical given the electricity issues noted previously), it does raise important questions about the responsibilities AI product creators and end-users have to use AI ethically.

Under Delaware corporate law (and that of most other states) corporations have “the ability to adopt charter provisions exculpating directors from liability for even gross negligence,” [20] which empowers directors to take risks with AI. Still, the “affirmative obligation [of the duty of loyalty] has at its core the requirement that directors and officers act to promote the best interests of the corporation and its sustained profitability, within the limits of their legal discretion and their sense of ethics.” [21] Directors are obligated to ensure the corporation operates within the bounds of the law and “[l]aw compliance…comes ahead of profit-seeking as a matter of the corporation’s mission.” [22] Delaware’s Caremark decision also obligates “fiduciaries to undertake active efforts to promote compliance with laws and regulations critical to the operations of the company.” [23]

In the U.S., governments have been slow to adopt AI regulations, but because AI will permeate so much of society, existing laws, such as anti-discrimination, product liability, and many others, apply to the use of AI. Thus, directors are obligated to ensure their companies’ use of AI operates within the bounds of the existing law. Even if the paper clip thought experiment were a practical reality, directors would be obligated to ensure that their AI does not take over every natural resource and wipe out humanity, as this would violate numerous laws.

That said, ensuring their companies operate within the bounds of the law is the bare minimum for directors, and the business judgment rule gives directors the ability to go further in ensuring ethical use of AI. “The business judgment rule gives [directors] substantial room to create a corporate culture with higher standards of integrity, fairness, and ethics than the law demands if they believe that will increase the corporation’s value, enhance its reputation, or otherwise rationally advance the best interests of the corporation and its stockholders.” [24] Directors can and should ensure that their AI systems operate in an ethical manner, as forgoing doing so could hurt the company’s value, reputation, and the interests of it and its shareholders. Indeed, a number of tech leaders, who could presumably benefit from the unfettered advancement of AI (along with their shareholders), including Elon Musk, have called for a moratorium on the development of powerful AI systems. [25] Unfortunately, AI’s profit-making potential seems to have made this moratorium unlikely from taking hold, but at least companies have the legal cover to slow their AI adoption and development if they choose. At the very least, companies should ensure they have policies and internal controls in place to govern their use of AI.

If Congress is able to pass legislation regulating AI, it might consider a requirement similar to that of the Sarbanes-Oxley Act, which requires public companies to include a section on internal controls for financial reporting and evaluate how well these controls are working in their annual reports. [26] Senior corporate officers must also take personal responsibility for ensuring their financial statements are accurate and acknowledge their personal responsibility for their financial reporting internal controls. [27] A similar law regarding AI could require companies to disclose how they use AI and what they use it for, what internal controls they have in place, and how effective these controls are, and force management to take personal responsibility for their companies’ AI use. This would go a long way in ensuring that AI is used ethically and responsibly.

ESG Investing Implications

Perhaps one of the biggest impacts AI will have on ESG in the near term is in simplifying the disclosure and benchmarking processes. The European Union (EU) “requires all large companies and all listed companies…to disclose information on what they see as the risks and opportunities arising from social and environmental issues, and on the impact of their activities on people and the environment” through its Corporate Sustainability Reporting Directive, which is intended to help investors and other stakeholders evaluate companies in terms of their financial risk as it relates to climate change. [28] This directive also applies to U.S. companies doing business in Europe. [29] The U.S. Securities and Exchange Commission recently promulgated “rules to enhance and standardize climate-related disclosures by public companies and in public offerings” [30] and there are numerous voluntary ESG reporting frameworks, such as the MSCI ratings, ISS E&S QualityScore, the Dow Jones Sustainability Indices, and the Global Reporting Initiative, to name a few. [31] Yet compiling the data—such as “vehicle mileage or weight of transported goods from third-party suppliers” [32] —needed for these disclosures can be challenging for companies, especially smaller companies with fewer resources. [33] Notably, research has shown that “[l]arger companies and those who interacted ‘frequently’, more than 10 times, with MSCI, were both more likely to have a high ESG rating.” [34] AI has the potential to make it easier for companies to collect data from various company locations and internal documents. Investors can also use AI to scan company filings such as annual reports to evaluate companies’ ESG risks and opportunities. Yet, some argue that because AI algorithms can be black boxes, [35] the use of AI to evaluate ESG risks “could make it more difficult for regulators and retail investors to make sense of already opaque methodologies.” [36] Others have argued that “no set of ESG metrics can capture the totality—or even majority—of a company’s social impact” and stakeholders need narratives and context to understand what ESG metrics mean in terms of a company’s ESG impact. [37] Perhaps in the future AI will be able to solve for this issue, but in its current state, AI is unlikely to able to provide investors, regulators, and other stakeholders with a company’s full ESG picture. Still, AI’s potential to make it easier for companies to disclose ESG metrics will likely improve society’s ESG understanding, benchmarking processes, and general ESG accountability.

The issues discussed in this paper are only some of the ways that AI will impact ESG. [38] AI could change society as we know it, and companies have a legal and moral obligation to ensure it is used responsibly and benefits not only their stockholders, but also their customers, employees, and communities. Ultimately, as Stephen Hawking said, “Success in creating effective AI, could be the biggest event in the history of our civilization. Or the worst. We just don’t know.” [39] Corporations must act to ensure it is the biggest event, not the worst event.

[1] How Could AI Destroy Humanity? – The New York Times (nytimes.com) .

[2] Guide to ESG Reporting Frameworks & Standards | Convene ESG (azeusconvene.com) .

[3] How can artificial intelligence help tackle climate change? (greenly.earth) .

[4] A.I. Could Soon Need as Much Electricity as an Entire Country – The New York Times (nytimes.com) .

[5] Amid record high energy demand, America is running out of electricity – The Washington Post .

[7] AI Is Accelerating the Loss of Our Scarcest Natural Resource: Water (forbes.com) .

[8] The Obscene Energy Demands of A.I. | The New Yorker .

[10] Amid record high energy demand, America is running out of electricity – The Washington Post .

[11] Ignorance is Strength: Climate Change, Corporate Governance, Politics, and the English Language (harvard.edu) .

[12] Amid record high energy demand, America is running out of electricity – The Washington Post .

[13] Guide to ESG Reporting Frameworks & Standards | Convene ESG (azeusconvene.com) .

[14] “In 2022, 19% of American workers were in jobs that are the most exposed to AI, in which the most important activities may be either replaced or assisted by AI.” Which US workers are exposed to AI in their jobs? | Pew Research Center .

[15] Duty and Diversity by Chris Brummer, Leo E. Strine, Jr. :: SSRN at 78.

[16] Is AI coming for our jobs? And does it have to WARN us? | Reuters .

[17] AI and the Workplace: Employment Considerations | Insights | Skadden, Arps, Slate, Meagher & Flom LLP .

[18] Guide to ESG Reporting Frameworks & Standards | Convene ESG (azeusconvene.com) .

[19] What Is the Paperclip Maximizer Problem and How Does It Relate to AI? (makeuseof.com) .

[20] Duty and Diversity by Chris Brummer, Leo E. Strine, Jr. :: SSRN at 68.

[21] Id. at 70.

[22] Id. (internal citation omitted).

[23] Id. at 7.

[24] Id. at 77.

[25] Elon Musk and Others Call for Pause on A.I., Citing ‘Risks to Society’ – The New York Times (nytimes.com) .

[26] What Are SOX Controls? Best Practices for SOX Compliance | AuditBoard .

[28] Corporate sustainability reporting – European Commission (europa.eu) .

[29] A Primer on the EU’s ESG Regulations | Corporate Finance Institute .

[30] SEC.gov | SEC Adopts Rules to Enhance and Standardize Climate-Related Disclosures for Investors .

[31] Guide to ESG Reporting Frameworks & Standards | Convene ESG (azeusconvene.com) .

[32] Decoding ESG Reporting: Navigating The Puzzle With AI Assistance (forbes.com) .

[34] http://proxygt-law.wrlc.org/login?url=https://www.proquest.com/trade-journals/esg-ratings-whose-interests-do-they-serve/docview/2871725896/se-2?accountid=36339 .

[35] “AI black boxes refer to AI systems with internal workings that are invisible to the user. You can feed them input and get output, but you cannot examine the system’s code or the logic that produced the output.” Why We Need to See Inside AI’s Black Box | Scientific American .

[37] No Stakeholder Left Behind: The Dangers of ESG Metrics | by Alex Edmans | Medium .

[38] Here is a more comprehensive list of the ways AI could benefit or harm ESG-related issues. Potential Opportunities and Risks AI Poses for ESG Performance | Barnes & Thornburg (btlaw.com) .

[39] Stephen Hawking says AI could be ‘worst event’ in civilization (cnbc.com) .

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View from the top (and the trenches): the current esg landscape.

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Richard Lindhorn is Vice President at VivoAquatics , a leader in water management technology solutions focused on sustainability.

In the evolving landscape of corporate responsibility, understanding and implementing robust environmental, social and governance (ESG) practices has become essential for long-term success.

It’s no surprise that leveraging the nuances of ESG, while focusing on pivotal frameworks, technological advancements and actionable strategies, can result in impactful change for companies and ultimately the environment. This isn’t just aspirational; it’s clear from the Global Reporting Initiative (GRI) and other sustainability-focused organizations that standardization, transparency and accountability from big and small companies and governments will move the needle toward protecting our planet and making us better stewards.

Sustainability Reporting Frameworks

Two key components driving sustainability reporting in the EU are the Corporate Sustainability Reporting Directive (CSRD) and the European Sustainability Reporting Standards (ESRS). While these frameworks are interlinked, they serve distinct purposes in the realm of corporate sustainability. The CSRD enhances and standardizes sustainability reporting across Europe, expanding the scope of the existing Non-Financial Reporting Directive (NFRD). It applies to all large companies, both listed and unlisted, as well as all companies listed on EU-regulated markets, including SMEs, with potential future expansion to other business types. The CSRD’s primary objectives are to ensure consistent and comparable sustainability information, improve transparency on sustainability matters and address the needs of investors and other stakeholders for reliable and relevant information. It mandates sustainability reporting for around 50,000 companies, requiring alignment with ESRS guidelines and the audit (assurance) of sustainability information.

On the other hand, the ESRS provides detailed standards to comply with the CSRD’s requirements, ensuring uniformity and consistency in sustainability reporting. These standards apply to companies under the CSRD mandate, covering a broad range of sustainability topics. The ESRS offers clear guidelines on required disclosures, facilitating comparability across companies and sectors. It includes comprehensive disclosure of sustainability impacts and risks and opportunities, with specific reporting on areas such as climate change, resource use and human rights.

The key takeaway from my perspective is that the CSRD sets the legal framework for sustainability reporting in the EU, while the ESRS provides specific standards and guidelines for compliance. By understanding and implementing these frameworks, companies in the U.S. can contribute to a more transparent and sustainable future, meeting the expectations of investors, regulators and society at large.

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Best 5% interest savings accounts of 2024, tapping into ai for a greener future.

AI is emerging as a powerful tool in driving sustainability. The technology can analyze energy consumption patterns to optimize usage, reduce waste and lower carbon footprints. Smart grids and AI-driven energy management systems can predict peak times and adjust supply accordingly. AI-powered systems can also enhance recycling processes by sorting waste more accurately, improving recycling rates.

The agriculture industry, powered by AI, enables the efficient use of resources, monitoring soil health, predicting crop yields and optimizing irrigation. Society benefits from AI's ability to process vast amounts of climate data to predict weather patterns and track environmental changes, aiding in disaster preparedness and resource management. On our highways, AI is used to optimize traffic flow, reduce emissions and manage urban resources efficiently, creating more sustainable urban environments.

In my industry, which involves cloud-based water management systems at hotels, resorts, attractions, fitness facilities and more, AI helps monitor water usage in real-time, detects leaks and suggests conservation strategies, improving the efficiency of renewable energy sources.

By integrating AI into sustainability practices, companies can make significant strides toward a greener, more sustainable future.

Why GRI Standards Matter For ESG Reporting

The GRI standards are recognized worldwide as aligning sustainability efforts with international best practices and are crucial for effective ESG reporting. They cover environmental impact, labor practices, human rights and anti-corruption measures, ensuring comprehensive ESG performance. Using GRI standards facilitates clear, consistent and comparable data for stakeholders, building trust and strengthening relationships. Additionally, they encourage continuous assessment and improvement of ESG practices, which is a game-changer for businesses that take ESG seriously.

Creating ESG Plans: A Win-Win For Business And Society

Crafting robust ESG plans is a must-have for sustainable business operations. ESG plans drive companies to operate more sustainably, reducing their environmental footprint and promoting responsible resource management. Businesses with strong ESG commitments often enjoy enhanced reputations, attracting consumers, investors and employees who prioritize social and environmental responsibility.

ESG plans also help identify and mitigate risks, enhancing a company’s resilience to future challenges and regulatory changes. Contrary to the outdated belief that ESG practices are a financial burden, studies show that companies with strong ESG performance often outperform their peers financially in the long run. And, studies show that a robust ESG plan can be a key differentiator in attracting and retaining top talent. This drives innovation and efficiency by encouraging teams to find new ways to reduce waste, improve energy efficiency and develop sustainable products and services.

Embracing ESG principles is no longer optional; it's essential. By understanding and implementing frameworks like CSRD and ESRS, leveraging the transformative power of AI, adhering to GRI standards and deeply integrating environmental, social and governance components into your corporate DNA, businesses can achieve a competitive edge that goes beyond mere compliance. This approach positions companies as leaders in sustainability, builds trust with stakeholders, attracts investment and drives long-term profitability.

The journey toward robust ESG practices demands commitment, transparency and continuous improvement. It is a path that promises not only a sustainable future for our planet but also enhanced resilience and success for businesses in the modern economy. As executives, the opportunity lies in pioneering these efforts, setting a benchmark for industry standards and creating a legacy of responsible leadership. By prioritizing ESG, we don't just safeguard our enterprises—we contribute to a thriving, equitable and sustainable global community. Embrace this imperative, lead with purpose and watch as your commitment to ESG transforms your business and the world.

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How Greed Got Good Again

In HBO’s Industry , Gen Z reveals itself to be just as money-obsessed as the corporate raiders of Wall Street .

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T he question before the room was how much blood the banker should bleed. Mickey Down and Konrad Kay sat in an editing bay in Cardiff, Wales, scrutinizing footage from the third season of Industry , their HBO drama about the drug-addled, oversexed employees of a multinational financial firm. They’d paused on one particular shot of a character realizing that his nose had sprung a leak after much snorting of powders. The blood had been added digitally, and it fired down straight and steady from the character’s nostril, like a burgundy laser beam.

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The 35-year-old Down, wearing a Nike zip-up vest and thick tortoiseshell glasses, stroked his chin. The blood was looking a little too gruesome. “We just want it to be noticeable; it’s a geyser at the moment,” he said. A producer noted his feedback, and another unpaused the footage. The next shot revealed that the banker had been cradling a newborn baby in his arms—and that the blood had splattered onto the infant’s cheek.

The image, and the writers’ matter-of-factness in discussing it, caused me to gasp. Down gave an apologetic chuckle. “We’re sort of numb to it, aren’t we?” he said. The 36-year-old Kay—the quieter and wryer of the two men—murmured, “It doesn’t register.”

It referred to the depravity of Industry , a study of lethal greed and ambition transmitted from one generation to the next. When the series debuted in 2020, it followed a class of new hires at the London offices of Pierpoint, a fictional competitor to the likes of J. P. Morgan and Goldman Sachs. Young and diverse in race, sexuality, and class , the protagonists entered a century-old institution at which “ culture change ”—an attempt to build a kinder, more ethical workplace—was supposedly afoot. Rather than upending the system, however, the new hires proved quick studies at old-fashioned self-dealing and backstabbing.

Industry has been praised for turning the jargon and technical intricacies of high finance into gripping entertainment. The show is also unmistakably a product of its time: Its pacing is as frenetic as a TikTok binge, and its plotlines touch on Brexit, meme stocks, and—in the upcoming season—green investing. Because of the show’s sharp-witted, slickly produced treatment of money, privilege, and existential emptiness, some critics have anointed it the heir to HBO’s Succession . But where Succession is fundamentally a family saga about the jaded rich , Industry focuses on fresh converts to the savagery and excesses of the business world. In that, it feels spiritually more akin to grandiose send-ups of 1980s corporate boom times: Wall Street , American Psycho , Glengarry Glen Ross . And like those predecessors, Industry can’t help but glamorize the very milieu it’s trying to skewer.

Today’s young adults—so often stereotyped as quiet-quitters and socialist revolutionaries, driven by idealism and fixated on self-care—may seem a far cry from the suspenders-wearing yuppies of the Reagan era. Industry , though, argues that the Wall Street mantra “Greed is good” is very much alive and well. In Down’s view, the typical Gen Zer is “a mini Margaret Thatcher.” He added, “I don’t even think they consider it, like, ‘capitalism.’ It’s just ‘securing the bag.’ ”

The inspiration for Industry came more than a decade ago, when a 21-year-old Merrill Lynch intern who’d reportedly worked for 72 hours without rest died of an epileptic seizure . (“It is possible that fatigue brought about his fatal seizure, but it is also possible that it is something that just happens,” the coroner said.) The then-BBC executive Jane Tranter read a news article about the incident and was horrified. This was a few years after Bear Stearns collapsed, and the ensuing crisis had thrown a harsh light on the win-at-all-costs ethos of high finance. Tranter told me that she had wondered, after the disaster of the 2008 financial crash, “why the fuck would anyone choose to go and intern in one of those banks?”

Then she found two aspiring TV writers who’d done just that. Down and Kay had met as undergrads at Oxford, where they bonded over similarities in their backgrounds. Both men were raised poshly, but their immigrant mothers—Kay’s from Poland and Down’s from Ghana—preached the importance of proving one’s worth with a paycheck. As Down put it, “The immigrant mentality is almost sort of a euphemism for capitalist .” When recruiters from the big banks came to campus, the two friends applied for jobs because it felt like what was expected of them. Down remembers thinking, “What the fuck else am I gonna do?”

Down landed in mergers and acquisitions at Rothschild & Co., Kay in equity sales at Morgan Stanley. They turned out to have little aptitude for the work—both of them left within three years, with dreams of making it in the entertainment world—but they did feel, for a while, seduced by the identity their roles provided. “I was really proud of my Morgan Stanley bag,” Kay remembered. “I’d take it into a bar. I’d be like, ‘Look at me; I’m such a big, swinging dick.’ ”

Big, swinging dick had been a prized title for high earners on Wall Street at least since its appearance in the 1989 book Liar’s Poker , in which the journalist Michael Lewis described the fraternity-like antics he’d witnessed at Salomon Brothers. When Kay and Down joined the workforce in the early 2010s, they quickly found that, despite the recent financial collapse, the BSD ethos was still going strong. “You came into contact with people who had been there literally since 1982,” Down said. “They were stuck in their ways. They were not going to change at all.” And just as the old modes of doing business remained intact, plenty of retrograde views did too. “The moment a woman turned her back, everything was about sex: what she looked like, what she was wearing, who’s fucked her, would you fuck her—all that sort of stuff,” Kay said. “And weirdly, a lot of the misogyny was from very senior women.”

When Down and Kay set about making a series inspired by their time in finance, they quickly realized that they wanted to dramatize the experience of fresh-faced newcomers adapting to an institution that refuses to evolve. The denizens of Pierpoint know that times are supposed to be changing: In one scene, the foulmouthed trader Rishi announces, in a tone of mock triumph, “Bullying has been eradicated from the culture!” Nevertheless, during the first season, the recent college grad Yasmin is targeted by her boss in a sexist tirade at a work dinner. That boss ends up taking a leave of absence and apologizing. Yet as Yasmin rises in the ranks, she pays forward her abuse to colleagues in subtle, but still horrifying, ways.

That Yasmin doesn’t look like her tormentor is the point. Previous portrayals of high finance emphasized it as a patrilineage: In Wall Street , the rookie trader Bud Fox idolizes the diabolical Gordon Gekko as the sort of man he can aspire to become. But Industry revels in the complexities of mentor and mentee relationships in a workplace shaped by overlapping social and demographic waves. In the first season, Harper Stern—a Black American trainee at the bank—finds her allegiances torn between two bosses: Daria Greenock, a white Millennial fluent in the rhetoric of corporate feminism, and Eric Tao, an Asian American Gen Xer feared for his ruthlessness. Both try to woo Harper with identity-based overtures. “People like us, born at the bottom … we intimidate people here,” Eric says, positing himself and Harper as fellow outsiders.

Ultimately, though, Harper doesn’t seem to feel sentimental affinity toward any of her elders. All she shares with them is a thirst for winning—and so she strategizes based on who has more clout in the corporate hierarchy. Myha’la Herrold, the actor who plays Harper, told me how she thinks about her character’s dynamic with Eric: “He’s like, Oh, I’m seeing myself in you . And she’s like, I would like to see myself where you’re sitting .”

Some viewers may be tempted to wonder whether Down and Kay have gone overboard on the cynicism. But just this year, a 35-year-old Bank of America associate who’d reportedly complained about 100-hour workweeks died of a sudden heart problem—recalling the sort of tragedy that inspired Industry years ago, and that was dramatized in the show’s premiere. (No definitive link between the employee’s workload and death was determined.) Surveys of generational attitudes about money and work suggest that growing up amid the chaos of inflation, crypto, and a pandemic—not to mention the constant, conspicuous salesmanship of online influencers—has encouraged, not challenged, aspirations toward wealth among young people. A recent New York Times article reported that college students are angling for so-called sellout jobs with a zeal that surprises longtime faculty. At Harvard, the share of grads going into finance and consulting is reaching heights not seen since before the 2008 financial crisis.

And despite Industry ’s disturbing take on the high-finance lifestyle, many in its audience have been the opposite of repelled. The creators told me that they regularly hear from new bankers who say that the show inspired their choice of career. One friend of Down’s reported that multiple people in his M.B.A. program had enrolled because they were hard-core fans of Industry . Recently, in a West London pub, two young guys approached Kay to express their admiration for the series. They seemed like exaggerated versions of the showrunners’ earlier selves—“two actual drunken, coked-up—for want of a better word—morons,” Kay said.

François Truffaut once said that no movie about war could ever truly be anti-war; history has shown the finance world to be virtually shame-proof. Young bankers have treated Liar’s Poker , an exposé, as “ an instruction manual ,” Lewis has said. Gordon Gekko lives on as a dorm-poster symbol of alpha-maledom. Even the sadistic, chain-saw-wielding Patrick Bateman of American Psycho has, in recent years, been memed as a mascot for the “rise and grind” ethos that some young men fetishize: wake up, work out, make money, repeat. (So what if a few body parts are stashed in the fridge?)

Down and Kay understand why finance types love their show. For all its darkness, Industry is a pageant of beautiful and superhumanly competent people entangled in slinky romances and high-stakes dealmaking. Entertainment about hyper-capitalism “has to have both the seductive element to it and the warning,” Down told me, and the seductive elements include fine cars, expensive clothes, and the freedom to do and say whatever you want so long as you’re closing deals. In Wall Street movies, “the first act is usually ‘Look how amazing this all is,’ ” Down said, and “every finance bro seems to just forget about the third act.”

But the show’s deeper appeal lies less in its depiction of the spoils of success than in its dramatization of the actual work. Industry ’s seductions and warnings seesaw relentlessly; each trading-floor triumph or delirious night at the club tends to crash into a comeuppance and a monstrous hangover. Even the older, more experienced characters are perpetually grinding—not because they have to, but because they want to. As one billionaire hedge-fund manager explains in the show, “It’s all just a cycle of victory and defeat.” The people of Pierpoint are addicted to the cycle itself.

Season 3, which premieres August 11, intensifies that chase to sometimes-nauseating extremes. “Every time we come back to Industry , it’s the same, but bigger and more … gross,” Herrold told me. The show is more lurid in its tone, more shocking in its twists, and it delivers, as Kay put it, even more “weird sexual stuff ” than before. “We just want to throw everything at the wall,” Down added. “The sweet spot for this show is when people”—audience and characters alike—“are about to have a heart attack.”

The escalating grossness is also making a broader point about the stakes of the game that Industry ’s characters are playing. This season focuses on the rise of ESG investments—short for “environmental, social, and governance.” Looking to tout itself as the greenest mega-firm in the business, Pierpoint funds a sustainable-energy company headed by Henry Muck, a handsomely vapid child of privilege played by Game of Thrones ’ Kit Harington. In the real world, ESG has been evangelized as a market-driven solution to the climate crisis, appealing to the idealism of younger investors and consumers. It has also been exposed, in various instances, as a front for fraud, speculation, and the rebranding of the planet’s worst polluters.

Unsurprisingly, Industry ’s angle on all of this proves, in Kay’s words, to be “the most cynical view you could possibly have.” The show makes quite clear that its characters and the institutions they work for are glorified gamblers—and that they’ve rigged the global casino so that their debts get paid by other people. Meanwhile, the lifestyles of the rich and amoral glitter more than ever; the new episodes’ settings include a yacht, a private jet, and a sprawling old-money estate. Although Industry ’s characters have never been virtuous, the “stripping away of humanity,” Kay said, is all but total this season.

Part of that is simply a function of time passing on the show: The longer these characters remain enmeshed in their work, the more corrupted they become. Eric—separated from his wife and in the throes of a midlife crisis—wins a promotion and gets caught up in toxic C-suite machinations. He realizes that there is always another moral line he’ll have to cross to succeed at his job. “We really did experiment with, like, ‘What happens if this guy really sells his soul for money?’ ” Kay said. “ ‘What happens if he really keeps making decisions which get rid of his personhood and make him an embodiment of the institution?’ And it takes him to a pretty fucking dark place.”

At its core, the show remains a portrait of intergenerational continuity, of avarice bridging gaps of age and sensibility. In Cardiff, I watched Kay and Down edit a scene in which a veteran money manager lectures Harper about the usefulness of insider trading (he’s nearly quoting Gordon Gekko’s dictate to only “bet on sure things”). The elder character, wearing a necktie while fly-fishing, refers to the younger one, who is clad in a leather trench coat and has a nose ring, as “terribly modern.” The line lands as a joke: Though they hail from different historical eras, these two characters are, in some ways, interchangeable. If Industry has a “thesis,” Kay said, it’s that, although social mores change, one generation of “animals with an economic incentive” is exactly the same as the next.

This article appears in the September 2024 print edition with the headline “How Greed Got Good Again.”

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