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He Helped Start the ESG Movement. Now He Wants to Fix It

Steve Lydenberg, a pioneer of responsible investing, says it’s time to focus on reforming systems.

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Steve Lydenberg’s passion for social change was inspired by anti-Vietnam War demonstrations, consumer boycotts, and the movement to divest from apartheid South Africa. But he didn’t take to the streets. Instead, Lydenberg turned to the world of finance to help catalyze societal change.

In 1990 he co-founded KLD Research & Analytics, the first firm to conduct environmental, social, and governance analysis of S&P 500 Index companies and sell that research to Wall Street. While there, he co-created the first socially responsible investing index of U.S. companies, now called the MSCI KLD 400 Social Index. But, as investor appetite for ESG data and sustainable investments has grown, Lydenberg says ESG has fallen short in addressing systemic issues such as inequality and climate change. So in 2015, he co-founded The Investment Integration Project, known as TIIP, to encourage what it calls ­system-level investing. Lydenberg, who turns 76 this month, spoke with Bloomberg Markets in August. The interview has been edited for length and clarity.