Research and Whitepapers

Recasting ESG – Separating Drivers from Impacts

2 min read

The building blocks of Environmental, Social and Governance (ESG) metrics were never intended to be equal or commensurable.

Good governance is a driver of positive environmental and social outcomes and impacts, rather than the impact itself.

Yet the desire to create marketability for products based around ESG ratings has led to a distortion of their original purpose of raising awareness and triggering transitions towards sustainability.

Of late, practitioners, academicians and civil society voices have criticised ESG metrics, questioning their purpose and legitimacy, pointing to the proliferation of frameworks and their lack of transparency, consistency, comparability or standards. Despite this, funds using ESG themes are on course to be over one third of global assets under management by 2025.

In this paper, we argue that it would be more credible, and more effective for sustainability transitions, if environmental, human and social impacts were evaluated separately from evaluations of governance drivers. Evaluation of investment impact using the Four Capitals valuation framework already exists as a robust alternative to the use of ESG ratings as surrogates for impact metrics. It enjoys consensus and is moving towards standardisation. It monetizes positive and negative externalities, thus introducing materiality into the analysis and enabling comparisons between companies and sectors with scientific and economic rigour.


  • Pavan Sukhdev, CEO and Founder, GIST Impact
  • Dr. Katell Le Goulven, Executive Director of the Hoffmann Global Institute for Business and Society, INSEAD
  • Dr. Vian Sharif, Head of Sustainability, FNZ Group
  • Joseph Sarvary, Sustainability consultant, ENGIE Impact
  • Simon Maughan, Chief Revenue Officer, GIST Impact
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