On the surface, it’s easy to see why the environmental and governance factors get so much of investors’ attention – they are easy to measure and understand. And in that, we can more easily define/model how they can benefit (i.e., profit) from these factors.
In the case of a utility, we can measure and see how their investments in solar and wind power directly enhance their bottom lines. Subsidies for new generation, cap & trade policies and such can quickly be boiled down to balance sheet items. For a manufacturer, we can see how water savings lowers costs and enhances margins.
The same can be said for governance issues. We have years of evidence that firms with good management and corporate mentalities produce better returns. Focusing on low debt, reputable dealings, no bribes, and other similar governance issues do indeed produce stronger returns. Again, this is easily quantifiable.
However, when looking at the social benefits of a firm or its products? That’s a harder nut to crack.