European Insights


ESG and shareholder value

04 September, 2019

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Perhaps indicative of the growing interest in the subject matter, last week saw widespread media coverage of an announcement by one of the largest U.S. business groups, The Business Roundtable. This collective, which represents 181 companies including Apple, Goldman Sachs, and Coca-Cola, has broken with decades of precedent by re-issuing its Statement of Corporate Purpose, but eliminating the founding principle of shareholder primacy. The statement now delivers five principles as commitments to the stakeholders in member companies:


  • Delivering value to our customers. We will further the tradition of American companies leading the way in meeting or exceeding customer expectations.
    Investing in our employees. This starts with compensating them fairly and providing important benefits. It also includes supporting them through training and education that help develop new skills for a rapidly changing world. We foster diversity and inclusion, dignity and respect.
  • Dealing fairly and ethically with our suppliers. We are dedicated to serving as good partners to the other companies, large and small, that help us meet our missions.
  • Supporting the communities in which we work. We respect the people in our communities and protect the environment by embracing sustainable practices across our businesses.
  • Generating long-term value for shareholders, who provide the capital that allows companies to invest, grow and innovate. We are committed to transparency and effective engagement with shareholders.


Shareholder primacy has been a staple of business practice and education since Milton Friedman's 1970 article in the New York Times Magazine promoted the concept that the sole purpose of business was to maximise profits for shareholders. Accordingly, this shift by leaders of the U.S. business community carries weight, even if it merely speaks to a view held by a number of industry leaders. How (or perhaps if) companies will implement this approach remains to be seen.

Regardless of the scale of any corporate adoption, there have been a few leading examples that have rejected a profit maximisation philosophy, some even accelerating this progress in more recent times. One of these is Unilever, which has repeatedly demonstrated this through social and environmental programmes, and most recently has taken the almost unheard of step of ensuring that its products have an individual purpose beyond driving corporate profits. These have historically ranged from the prevention of infectious diseases, all the way to combatting climate change.

As set out in our recent paper 'ESG andShareholder Value' - our investment team recognises how investors, through the appropriate application of certain ESG factors, can help to ensure not only a more balanced and long-term approach to business, but also that investors can seek long-term value through their investments.

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