ESG AND CORPORATE SUSTAINABILITY: A VIEW FROM THE UK.

The idea that companies and corporate governance should contribute to sustainability is gaining ever greater acceptance, but there is far less consensus on how exactly this is supposed to happen. The mainstream approach, and the one currently taken by the United Kingdom (“UK”), has been that shareholders (and especially institutional investors) should be informed so that they can press companies to bring their activities in line with the imperatives of sustainability. This is reflected in the emergence of Environmental, Social, and Governance (ESG) investment, in which investor preferences for companies that disclose good ESG performance or receive good ESG ratings from third-party agencies are supposed to steer companies toward more sustainable business. Since 2006, the UK’s approach to mandatory corporate non-financial and sustainability reporting has been narrowly financial, intending to inform shareholders so that they can steer companies to take more or less account of what we now call ESG matters. Despite the UK leaving the European Union (“EU”), it appears that many large UK companies will still have to follow the new EU sustainability disclosure rules, which extend further, requiring disclosure of stakeholder impacts. Moreover, some UK companies will have to follow EU rules on mandatory environmental and human rights due diligence in the near future. The EU has also proposed regulation of ESG rating providers that goes further than the UK’s recently published code of conduct. Beyond these developments, the UK’s corporate governance and stewardship codes pay lip service to questions of corporate purpose, sustainability, and ESG matters but remain primarily oriented towards shareholder value. [ABSTRACT FROM AUTHOR]