ESG is increasingly acknowledged as a must-have pursuit for philanthropic organisations, but its meaning and implementation remains a source of confusion

Market Business News calls ESG ‘the three key factors when measuring the sustainability and ethical impact of an investment in a business or company’. These three initials are increasingly bandied about and, like siblings born from the same egg, the component parts appear to be inseparable. But are E and S sometimes out of sorts with G? Most of us will know that they stand for environmental, social and governance and here’s a first point of dissonance: the first two are adjectives and the third a noun that sometimes does duty as an adjective. What noun are they meant to modify? And is the concept essential to institutional philanthropy or has it been awkwardly foisted on to it? The last of these questions was a key theme of the Nordic Foundations Conference in Copenhagen late last year. Participants, it turned out, were reasonably comfortable with the E and the S, but wrestled with the G.

Is the concept essential to institutional philanthropy or has it been awkwardly foisted on to it?

Foundations represented at the Copenhagen conference were aware that there are both inward and outward-facing aspects to their environmental and social impacts. The outward-facing element is their mission – how do they use their grantmaking to bring about environmental and social benefits? The inward-facing element is not so much about what they achieve as organisations, but what they consume or produce in doing so, whether they do it in accordance with certain standards and whether these can abide the scrutiny of themselves and of others. This aspect is generally framed in terms of investments. To put it crudely, the outward face is about how they spend their money, the inward face is about how they make it.