Governance: The Forgotten ESG Factor

BOSTON, MA, June 12, 2023 — Despite climate change urgency and a rise in social movements, there have been several market-moving events over the last year that can be attributed to lapses in corporate governance. In this piece, we outline the evolution of corporate governance in the U.S. and describe a renewed approach to governance analysis that seeks to form a more complete assessment of risk. In our view, the current formulaic approach involving quantitative scores and comparisons fails to recognize that governance is often nuanced and idiosyncratic in nature. Amid elevated market volatility and tightening financial conditions, investors who combine a quantitative and qualitative approach to governance analysis will likely find greater success navigating this evolving backdrop and avoiding situations that endanger investment returns.

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