Investment Stewardship for Positive Societal Impact

February 01, 2018

In recent years, the growth of investor interest in sustainable investing has been remarkable.



  • Companies are increasingly addressing environmental, social and governance (ESG) factors as part of strategic and operating decisions. Firms that perform better in some of those factors subsequently have better financial performance.
  • However, there are limits to how much individual companies can accomplish in achieving progress toward environmental, social and governance goals.
  • Companies that devote resources to certain environmental, social and governance factors may be at a short-term competitive disadvantage to competitors that do not. Collaboration within industries on sustainability issues can alleviate that disadvantage.
  • This paper proposes that large investors, including index funds, active managers and pension funds can act as “stewards of the commons” by helping build and sustain industry and more broadly systems-level collaborations for ESG issues.


As that interest has grown, the response of corporations has evolved. Early on, companies usually allocated resources towards projects with positive impact for employees, local communities, and other stakeholders. More recently, corporate strategies have become more sophisticated, integrating environmental, social and governance factors at the core of the organization to guide both strategic and operating decisions.

Studies have shown that such moves by companies often enhanced financial performance through cost savings, increased brand value, innovation, employee productivity, and lower cost of financing. Other research has documented that sustainability disclosure by companies is helping drive stock performance, as investors use that information to sharpen valuations relative to industry peers.

However, there are clearly limits to how far corporate self-interest can go in helping foster positive social change. In this paper, we discuss those constraints and offer a new paradigm: investors as stewards of the commons. Investors already routinely engage in constructive advocacy with individual companies for environmental, social and governance goals, and these efforts often influence entire industries. We show that with the great concentration of assets in large firms, investors are uniquely situated to extend these “win-win” initiatives, while improving the risk/return profile of their portfolios. By advocating for collaboration, investors can provide the positive impetus in the many cases where even the best efforts of individual firms are likely to fall short.

To read the full paper, click here.

This paper was adapted in collaboration with Calvert from the following study: Serafeim, George, Investors as Stewards of the Commons? (August 7, 2017). Harvard Business School Accounting & Management Unit Working Paper. Available at SSRN: George Serafeim conducts joint research with Calvert aimed at enhancing public education and knowledge related to Responsible Investing and business practices; he receives compensation for this work.

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