Epistemic Gerrymandering: ESG, Impact Investing, and the Financial Governance of Sustainability

Are investors ruining ESG by cherry-picking its definition?

In "Epistemic gerrymandering: ESG, impact investing, and the financial governance of sustainability", Philipp Golka examines the epistemological foundations of ESG and impact investing frameworks.

He focuses on how these approaches shape the governance of sustainability issues based on a critical analysis of ESG and impact investing literature, industry reports, and policies.

His main conclusions challenge the financial sector to reconsider how they conceptualise and govern sustainability issues:

• Epistemic gerrymandering describes how ESG and impact investing frameworks selectively include or exclude certain forms of knowledge and expertise in sustainability governance.
• This epistemic gerrymandering leads to a narrow, financialised view of sustainability that may not effectively address complex social and environmental challenges.
• ESG and impact investing approaches tend to prioritise financial expertise and quantitative metrics, often at the expense of local, qualitative, and contextual knowledge about sustainability issues.
• There are three key mechanisms of epistemic gerrymandering: the creation of new expert roles and knowledge hierarchies, the privileging of certain forms of evidence and measurement, and the reconfiguration of accountability relationships.
• These mechanisms result in a sustainability governance framework that favours financial sector actors and quantitative metrics, potentially marginalising other stakeholders and forms of expertise.
• This approach to sustainability governance may reinforce existing power structures and limit the transformative potential of ESG and impact investing initiatives.

This article provides a thought-provoking critique of the foundations of ESG and impact investing, based on a qualitative approach to unpack the implicit assumptions and power dynamics embedded in current practices and frameworks.

It encourages practitioners to reconsider how they incorporate different forms of knowledge and expertise in their ESG and impact investing strategies and how they conceptualise and govern sustainability issues.

The study's focus on epistemology may however overlook the practical need for comparable and scalable reporting frameworks, sustainability metrics, and impact measurement methodologies, as well as the efficiency improvements gained through them.