(Barron’s) Emerging critiques of ESG are strongly grounded in the economic consequences of investors’ narrow focus on ESG priorities. For example, the cost of capital for activities frowned upon by ESG–like fossil fuel production–has significantly increased, contributing to inflation and undermining US energy security.
Yet the concept of stakeholder capitalism is proving more durable. Sometimes conflated with ESG, stakeholder capitalism is the idea that businesses have responsibilities to more than just their shareholders. Despite the valid economic critiques of the consequences of ESG investing, no serious intellectual challenge to stakeholder capitalism has emerged.
This failure is due to the fact that creating value for shareholders is not a zero-sum game. Businesses have found that considering the interests of their customers, employees, suppliers and communities can help deliver superior returns for their shareholders. The line between stakeholder and shareholder capitalism is quite blurry.
Read more here.