The Ethics of ESG Integration: Ethical Dilemmas of Quantification

Unlike previous approaches to sustainable investing focused primarily on excluding companies from problematic sectors such as tobacco, the aim of ESG integration is to incorporate the assessment of ESG characteristics within mainstream investment analysis. This aim has given rise to claims that ESG integration is not about value judgements but focuses only on neutral risk-return calculations. Against such framing, I argue that various ethical concerns inevitably arise when considering the quantification process underlying the generation of data used in ESG integration approaches. Drawing on the literature related to quantification and commensuration, I identity four areas in which ethical concerns can arise: (1) the strong focus on financial materiality; (2) the aggregation of disparate and often incommensurable ESG data; (3) ESG measurement problems; and (4) the treatment of ESG data as a private good. My analysis shows how quantification processes in these four areas give cause for ethical concerns related to which aspects of sustainability are rendered visible or invisible; how power relations between different field actors are structured by quantification; and which organizations have access to the opportunities that prevailing processes of quantification afford.