The Social Origins of ESG?: An Analysis of Innovest and KLD

40 Pages Posted: 30 Jan 2019 Last revised: 14 Sep 2019

See all articles by Robert G. Eccles

Robert G. Eccles

University of Oxford - Said Business School

Linda-Eling Lee

MSCI Inc.

Judith C. Stroehle

University of Oxford - Said Business School

Date Written: August 20, 2019

Abstract

This paper uses the study of two ESG data vendors – KLD and Innovest – to exemplify the “social origins of ESG” argument made by Eccles and Stroehle (2018). Based on in-depth interviews with the organizations’ founders and historical document analysis, we recap the history of the cases and show how different origins, philosophies, and “purposes” of ESG shaped the methods and data characteristics of two of the most important data vendors of their time. We discuss why MSCI chose to continue with the financial value-oriented methodology of Innovest, while discontinuing the values-driven KLD. We show that not only the creation, but also the use of “non-financial performance” concepts rely on processes of social construction. Finally, with this paper we join the call for more explicit contextualization of ESG data, highlighting that both practitioners and academics need to better understand the social construction that underlies analyses which use different concepts of ESG.

Keywords: Sustainable Investing, ESG, Non-Financial Data, Social Construction

JEL Classification: N20, E22, E01, M14, M49, Q01, Q56

Suggested Citation

Eccles, Robert G. and Lee, Linda-Eling and Stroehle, Judith, The Social Origins of ESG?: An Analysis of Innovest and KLD (August 20, 2019). Available at SSRN: https://ssrn.com/abstract=3318225 or http://dx.doi.org/10.2139/ssrn.3318225

Robert G. Eccles

University of Oxford - Said Business School ( email )

Park End Street
Oxford, OX1 1HP
Great Britain

Linda-Eling Lee

MSCI Inc. ( email )

Shanghai
China

Judith Stroehle (Contact Author)

University of Oxford - Said Business School ( email )

Park End Street
Oxford, OX1 1HP
Great Britain

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