For those fascinated with origins, a new research paper from the University of Pennsylvania Law School has the answer, and digs further into its evolution and issues today.
The seeds of ESG are in a speech made by then UN General Secretary Kofi Annan in 1999 – where his UN tenure marked "a change of 180 degrees” in the UN engaging the corporate sector as a major global player. In his speech Secretary Annan proposed a “Global Compact” that would “underpin the new global economy” by promoting principals for “human rights, labor standards and environmental practices” without which the global economy would be “vulnerable to backlash from all the [negative] ‘isms’ of our post cold war world.” His proposal became the Global Compact in 2000, with ten principals in the areas he noted, plus anti-corruption. “Within just a couple of years, approximately 1,000 firms were signatories to the Compact” with the first environmental convening on climate risk in 2003. But this wasn’t quite ESG yet…
In 2004, Secretary Annan went further by focusing on the financial sector, inviting “55 of the world’s leading financing institutions” to join a new effort under the Global Compact called “Who Cares Wins”, which, in its initial report has the very first reference to ESG, with recommendations “on how to better integrate environmental, social and corporate governance issues” into their businesses.
Of the original 55 invitees, 18 participated and endorsed Who Cares Wins, including: “Goldman Sachs, Morgan Stanley, UBS, Credit Suisse Group, Deutsche Bank, HSBC, Banco do Brasil, BNP Paribas, as well as insurance companies such as Aviva, and investment advisors such as Innovest.”
The first Who Cares Wins convening report called for “a better inclusion of environmental, social and corporate governance (ESG) factors in investment decisions” to forward worldwide adoption of the Global Compact principals.
Thus ESG begins its journey.