The ESG Initiative at the Wharton School
Facing pushback and government scrutiny, ESG investing may be headed for change
Originally, socially responsible investing was about avoiding unsavory industries like tobacco. Now, it’s about thoughtfully choosing where to put your money.
Witold Henisz, who directs the ESG Initiative at the University of Pennsylvania’s Wharton School, said ESG started gaining traction in 2015, thanks to Larry Fink, the CEO of giant investment firm BlackRock.
“His annual letter to the companies in which he invests, which is basically every publicly traded company in the world, started shifting the tone and the subject of the letter,” Henisz said.
Fink started covering topics like climate and social change more intensely, and he increased the pressure every year. At the same time, climate activist Greta Thunberg and the Black Lives Matter movement were helping to spark interest in change. By 2021, ESG funds accounted for 10% of worldwide fund assets.
But in the rush to change the world, no one created rules about ESG.
“We got a little ahead of ourselves,” said Henisz. “You know, we all wanted to believe we could get to the climate transition, we could effect societal change, it would be easy. It’s not easy.”