Academics Question ESG Studies That Helped Fuel Investing Boom

As Wall Street’s passion for sustainability began surging about five years ago, Andy King looked on with apprehension. Academics at Harvard University, the London Business School and other institutions were churning out research asserting that doing good for people and the planet was also good for company profits. The papers have been quoted in US Senate testimony, cited by regulators crafting corporate climate rules and invoked by Wall Street firms marketing funds valued at billions of dollars.

King, a professor of business strategy at Boston University, questioned the studies’ conclusions. In decades of analyzing whether companies could profitably reduce their harm to the environment, King had found the financial gains were often too small to affect the bottom line. Digging into the latest research, scrutinizing complex mathematical formulas and parsing tens of thousands of data points, he discovered what he says are flaws that skewed the results. “The evidence supporting ESG just wasn’t solid,” King says.