ESG considerations in investment and operations existed centuries before we called it ESG. The key drivers for ancient “exclusion list” or “code of conduct” prototypes were religion, moral norms, and cultural values. Some examples of value-based investment can be seen in the 1700s with the Quakers and Methodists in the United States and Europe who would exclude slave labor from their investment practices.
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As early as the 1960s, there was a growing movement for divestment from Apartheid South Africa before it came to the fore in the mid-1980s. Apartheid was an imposed system of rule based on racial segregation that lasted from 1948 to 30 June 1991 in South Africa. The divestment campaign and broader mounting political pressure from global players has been widely credited as one of the galvanizing forces leading to the end of Apartheid.
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The “Triple Bottom Line,” or the notion of People, Planet, Profit (PPP), was the first time businesses had to focus on two other P’s, beyond profits. The concept was the starting point of what later became ESG or SRI, growing in prominence following the ratification of legislation from the United Nations. In 1992, The United Nations Framework Convention on Climate Change (UNFCCC) is established, signed by 154 states at Rio de Janeiro, coming into effect in March 1994. The overall goal of the UNFCCC is the “stabilization of greenhouse gas concentrations in the atmosphere, at a level that would prevent dangerous anthropogenic human-induced interference with the climate system.”
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2006 – The United Nations’ Principles for Responsible Investment (UNPRI) reporting framework is launched in April 2006, following an invitation from the then-United Nations Secretary-General Kofi Annan to the world’s largest institutional investors to come together to develop the Principles for Responsible Investment. The number of signatories has grown approximately 40-fold since its inception from 100 to over 4,000.
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Investors searching for yield created notable growth in interest around natural resources, which were originally seen as an offshoot of the private equity and infrastructure asset classes.
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2015 – The Sustainable Development Goals (SDGs) are established by the United Nations General Assembly. The intention is to achieve them all by the year 2030. There are 17 goals, with a holistic approach to addressing these five pillars: Basic Needs (Nutrition, Affordable Housing); Empowerment (Decent job, Education); Climate Change (Alternative Energy, Green Buildings); Natural Capital (Sustainable Water, Sustainable Agriculture); Governance (Bribery & Ethics, Governance Structure).
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A United Nations body for assessing the science related to climate change, releases its Special Report on Climate Change on the impacts of global warming of 1.5°C above pre-industrial levels.
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It is an EU regulation that came into effect on March 10, 2021, to help institutional investors, fund managers, and other financial market participants understand and report on how sustainability risks are integrated into their investment decision-making and the impacts on sustainability factors.
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