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Lifecycle

History: SRI to ESG to Impact

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History: SRI to ESG to Impact

Values-based investing is not a 21st-century invention. Long before BlackRock published a sustainability letter or MSCI issued its first ESG score, investors were asking a deceptively simple question: does it matter how a company makes its money, not just how much? The answer has been yes — haltingly, controversially, but persistently — for more than three centuries.

From Faith to Finance​

The earliest recorded exclusion screens were driven by religious conviction. Quakers in 17th-century England and colonial America refused to profit from the slave trade or weapons manufacturing. John Wesley, the Methodist founder, preached in 1760 that Christians should not invest in industries that harmed workers or society. These were not portfolio-construction techniques — they were moral stances expressed through capital.

That ethical impulse lay largely dormant in mainstream finance until the mid-20th century, when two forces brought it back: the civil rights movement and the Vietnam War. Campus activists pressured university endowments to divest from companies that profited from the war or from South Africa's apartheid regime. The Pax World Fund, launched in 1971, became the first US mutual fund to explicitly screen out defense contractors — a direct response to investor demand for Vietnam-era conscience.

The Apartheid Turning Point​

The anti-apartheid divestment campaign of the 1970s and 1980s was a watershed. Dozens of US states passed laws requiring pension funds to sell South African holdings. Colleges faced student sit-ins. By 1990, over 200 US universities had divested, and more than 200 companies had withdrawn from South Africa. Whether divestment contributed to apartheid's end is still debated by economists, but it established a crucial precedent: institutional capital can be mobilized around social objectives, and that mobilization can generate real political pressure.

Disaster, Data, and the ESG Acronym​

The 1989 Exxon Valdez oil spill produced a different kind of response: the creation of formal environmental standards for corporations. A coalition of investors and environmental groups formed CERES (Coalition for Environmentally Responsible Economies) and issued the Valdez Principles — ten commitments covering waste reduction, safe products, and environmental oversight. Companies were asked to sign; most refused, but the framework established the idea that investors had a legitimate interest in corporate environmental management.

The acronym "ESG" itself was born in 2004, in a report commissioned by UN Secretary-General Kofi Annan and titled "Who Cares Wins." The report, produced by financial institutions including Deutsche Bank and HSBC, argued that incorporating environmental, social, and governance factors into capital markets analysis was both financially sensible and good for society. Two years later, the UN Principles for Responsible Investment launched with 63 founding signatories. By the mid-2020s, the PRI had over 5,000 signatories managing more than $120 trillion in assets.

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