How ESG Entered the Business World: A Historical Primer

Environmental, Social, and Governance—three simple words that have grown into one of the most transformative frameworks in modern business. But how did ESG rise from a fringe philosophy to a concept that today influences trillions in global investment decisions? Let’s take a step back and explore the origins of ESG and its integration into the business world.

The earliest roots of ESG can be traced back to the early 2000s. At the heart of the movement was James Gifford, then the Founding Executive Director of the United Nations Principles for Responsible Investment (UNPRI). His concern was striking: while investors vocally supported environmental and social causes, their portfolios often unknowingly funded the very industries causing the damage they opposed.

This contradiction led Gifford to create a new investment framework. In 2006, the UN released the six Principles for Responsible Investment, which encouraged financial institutions to consider ESG factors in their analysis and decision-making. By signing the PRI pledge, institutions committed to aligning investments with broader societal values—transcending the traditional focus on short-term profits.

These principles weren’t just about ethics; they offered a pragmatic approach to identifying long-term risks and opportunities. Over time, they were joined by a broader agenda: the United Nations’ 2030 Sustainable Development Goals (SDGs). These 17 goals provided specific benchmarks companies could adopt to integrate ESG into their business models, covering issues like poverty, clean energy, education, and gender equality.

As financial institutions increasingly pledged their support, ESG began influencing access to capital. By 2020, more than one-third of professionally managed assets worldwide were held by firms aligning with ESG principles. In many industries, ESG compliance has moved from a differentiator to an expectation.

ESG did not emerge overnight—it is the result of decades of evolution, values-driven investment, and market adaptation. Today, ESG isn't just about reputation—it can affect a company’s cost of capital, insurance premiums, and long-term viability. Business owners and investors alike are now asking: not whether ESG matters, but how much.