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ESG: Should E and S break up with G?

17 May 2023 Articles

This article by David Risser, Managing Director of Morrow Sodali, was penned for Board Agenda and discusses the idea of separating environmental and social factors (E&S) from governance (G). E&S should be seen as a comprehensive measure of sustainability, while governance focuses on responsibility and accountability. David's article builds on insight gleaned from our recent study on the governance of sustainability in major global banks, highlighting the need for different governance approaches based on the maturity of sustainability practices within the organization.

David points out the practical shortcomings of the current approach that combines E&S and G under the ESG framework. He suggests that expertise in E&S and governance are distinct, and separating them would allow for a more focused and effective approach. Management can then concentrate on building resilience and identifying sustainability opportunities, while the board takes on the oversight role. As market players' understanding of E, S, and G matures, David suggests reevaluating why they are grouped together and argues that separating E&S from governance would lead to better outcomes overall, despite the challenges involved in implementing the separation.

Click here to read the article in full.

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