Traditional financial management curicula establish that a corporation’s primary objective is to maximize the value of the firm and, in turn, maximize shareholders’ return. Advocacy groups and the socially responsible investing (SRI) community have nothing against companies that strive to increase earnings — so long as profits aren’t maximized at the expense of local communities, employees, and the environment.

What’s been difficult, though, is making the link between environmental, social and governance (ESG) issues and financial performance. Over the years, dozens of studies have reported on how well corporate citizens perform from a financial standpoint.

My financial textbook, as well as some SRI skeptics, argues that companies that spend resources pursuing “extra-financial” objectives are at an inherent financial disadvantage to their competitors that instead devote those resources to seeking lower cost production, developing new products, and maximizing sales.

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An article to share with you on a new socially responsible investing firm founded by Al Gore and the former CEO of Goldman Sachs Asset Management, David Blood.

The article has good insight and perspective on a systems-based approach to environmental, social and governance (ESG) research. Both Blood and Gore emphasize the interrelationships among companies and the broad systems in which they operate.

It also provides a overview of how the SRI industry has evolved beyond its initial dependence on exclusionary screens, which were the foundation of the SRI movement beginnning with the anti-war stance of the Quakers.

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