Economy and Society

ISSN: 0308-5147 (Print) 1469-5766 (Online) Journal homepage: www.tandfonline.com/journals/reso20

‘Responsible investment’: ESG and the post-crisis

ethical order

Stefan Leins

To cite this article: Stefan Leins (2020) ‘Responsible investment’: ESG and the post-crisis ethical
order, Economy and Society, 49:1, 71-91, DOI: 10.1080/03085147.2020.1702414

To link to this article: https://doi.org/10.1080/03085147.2020.1702414

Published online: 13 Feb 2020.

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Economy and Society Volume 49 Number 1 2020: 71–91
https://doi.org/10.1080/03085147.2020.1702414

‘Responsible investment’:
ESG and the post-crisis
ethical order

Stefan Leins

Abstract

This paper looks at recent forms of ‘responsible investment’. It follows the use of
ESG within a large global bank. ESG is a valuation technique that takes into
account environmental, social and governance issues. Drawing on ethnographic
data, the paper explores how ESG has become an accepted concept among finan-
cial analysts, and looks at how they implement it in their everyday calculations. It
argues that ESG enables financial analysts to understand factors related to corpor-
ate responsibility as market signals and to use them to support their investment
narratives. It concludes that the application of ESG has transformed ‘responsible
investment’ from a normative attempt to increase the morality of investing into a
speculative practice of valuation. This creates profit from current social conten-
tion and crises of capitalism.

Keywords: ethnography; ESG; financial analysis; responsible investment;

speculation; valuation.

Introduction

Since the beginning of the new millennium, and especially since the start of the
financial crisis in 2008, concepts such as ‘responsible investment’ and ‘corporate
social responsibility’ have become part of mainstream financial market dis-
course. Whereas in the twentieth century, these terms were predominantly
used by financial actors and institutions specializing in a small niche, promoting
social and environmental responsibility is now an integral part of financial

Stefan Leins, Department of Sociology, University of Konstanz, Universitätsstraße 10,

78464 Konstanz, Germany. E-mail: stefan.leins@uni-konstanz.de

Copyright © 2020 Informa UK Limited, trading as

Taylor & Francis Group
72 Economy and Society

market activities (cf. Dumas & Louche, 2016; Sandberg et al., 2009; Welker &
Wood, 2011). Investors are increasingly looking for ways to invest their money
in a morally acceptable way. Publicly listed companies, for their part, put a great
deal of effort into setting up and communicating their ‘corporate social
responsibility’.
This trend is especially striking in sectors that have long been avoided by self-
declared responsible investors. BP, for example, states that the company’s
acronym no longer stands for British Petroleum, but for ‘beyond petroleum’
(Beder, 2002). Nestlé claims to create ‘shared value’ for the economy and
society (Nestlé, 2016). Lockheed Martin, the world’s largest arms manufac-
turer, states on its website that the company ‘has long been driven by the
concept of sustainability, a paradigm of corporate social responsibility’. It also
defines sustainability as ‘fostering innovation, integrity and security to protect
the environment, strengthen communities and propel responsible growth’
(Lockheed Martin, 2016).
One current indicator of this trend for economic actors to claim responsible
behaviour is ESG. ESG is an investment strategy that considers environmental
(E), social (S) and governance (G) issues when valuing company stocks. As a
concept, ESG was mainly popularized by the Freshfields report in 2005,
which led to the establishment of the United Nations Principles for Responsible
Investment (UNEP FI, 2005, 2015). Many ideas contained in this report,
including ESG, were later adopted by financial market participants. Today,
ESG is an integral part of most investment strategies that claim to foster
‘responsible investment’ (cf. Arjaliès, 2010; Halbritter & Dorfleitner, 2015).
ESG investment is based on an assessment of a company’s non-financial
market data and aims to give investors an idea of the company’s social and
environmental commitment. Usually, financial analysts are responsible for
assessing such data. Financial analysts analyse and interpret market data and
trends, normally in order to predict how markets might develop in future. Tra-
ditionally, financial analysts work with financial and economic data, such as a
company’s earnings, sales or cash flow (financial data), or the development of
interest rates or growth estimates (macroeconomic data). They have also,
however, always been interested in other sources of data that could eventually
impact market movements. The establishment of the ESG concept has now
institutionalized this screening of what analysts refer to as non-financial data
(cf. Leins, 2018; Nicholls, 2010).
In economic sociology, the work of financial analysts is usually understood as
a practice that frames market information to make it applicable to investing, and
that thereby produces and advertises a particular kind of market knowledge.
Scholars such as Knorr Cetina (2007, 2011) and Wansleben (2012, 2013)
argue that the expert knowledge arising from the practices employed by finan-
cial analysts is an outcome of the financial analysts’ ‘epistemic culture’ (cf. Riles,
2010). Beunza and Garud (2007) and Preda (2007), by contrast, claim that finan-
cial analysis is a mode of translation that transforms conceptual thoughts on how
markets ought to work into valuation schemes. This second approach goes back
 Stefan Leins: ‘Responsible investment’ 73

to Callon’s (1998) work on performative effects and to the analysis of the estab-
lishment of ‘calculative agencies’, i.e. configurations of human actors and tech-
nologies that enable valuation in a financial market context (for an overview of
studies adhering to this second approach, see all contributions in Callon et al.,
2007).
For this paper, I want to propose a different approach; one that, rather
than focusing on information and knowledge alone, also integrates the ana-
lysts’ abilities to create imaginaries and narratives about a possible future in
financial market developments.1 In anthropology, Hertz (1998; with
Lépinay, 2005), Zaloom (2003, 2006, 2009) and Rudnyckyj (2010; with
Richard, 2009) have pointed to the fact that practices in finance are
shaped as much by affect and embodied experience as they are by concepts
of the market and by calculative agencies. Furthermore, as Chong and
Tuckett (2015) illustrate, these affective elements and embodied experiences,
along with calculative practices, materialize very often in the convictions that
financial market participants develop when trying to understand how finan-
cial markets work.
As Bear argues (2015, 2020), these kinds of interpretative practices that run
alongside calculation and knowledge construction are at the heart of speculation.
They are deployed to create visions of the future, which are then linked to prac-
tices that aim to generate financial profit. As I will show, the work of financial
analysts is based as much on the ability to imagine and narrate possible futures as
it is on the ability to produce knowledge and to calculate. As a result, valuation
and evaluation become two aspects of the very same practice. Analysts count
and at the same time use their imagination. They mine data and fantasize
about a possible future. They add, discount and relativize the numbers they
work with. In short, they combine processes of valuation with a critical evalu-
ation of society and finance.
In this interplay of valuation and evaluation, and in the specific situation of
post-crisis financial investing, ESG has assumed a decisive role. As I will
demonstrate, after the outbreak of the financial crisis in 2008, ESG became a
technique for harmonizing the ethical order of the market (which is based on
the ideal of optimizing financial gains) with the ethical order of society
(which is based on moral concerns about the consequences of such optimiz-
ation). This is mainly because financial analysts managed to reframe moral con-
cerns in a way that meant they could be used to underpin the motives of
investors who were primarily looking to increase their financial returns. As
such, ESG itself has become a tool of speculation.
To make this point, I will begin by presenting a number of conceptual
thoughts on the rise of ‘responsible investment’. I do this not only to historicize
and contextualize the practice, but also to explain why ESG is different in
quality and impact than earlier concepts of ‘responsible investment’. I will
then draw on ethnographic data to show how a group of financial analysts at
a global Swiss bank I studied came to use ESG as an accepted concept. I will
argue that the ESG concept allowed the analysts to understand factors related
74 Economy and Society

to moral concerns as market signals and to use them as support for their specu-
lative investment narratives.
Building on my ethnographic account, I will then claim that the transform-
ation fostered by ESG has created a new form of governmentality of markets.
ESG was a market response to the financial crisis that started in 2008, and
helped to install a new ethical form of valuation. Through the financial analysts’
application of ESG, this new ethical form of valuation has integrated social con-
tention into the ethical order of the market, subordinating the broader impli-
cations of this to profit making.

Putting ‘responsible investment’ into perspective

In 1970, the economist Milton Friedman stated that ‘the social responsibility of
business is to increase its profits’. In doing so, he dismissed calls from a number
of people to judge economic activities in terms of their social and environmental
impact (Friedman, 1970; cf. Garriga & Melé, 2004). This view has dramatically
changed within the last four decades. Today, it is quite normal for publicly
listed companies to highlight their ‘corporate social responsibility’ independent
of their actual business activities. ‘Acting responsibly’ is now a major claim made
by investors, producers and consumers alike (cf. Carrier, 2012).2
Economic sociologists and experts in management studies have made several
attempts to explain this shift. A number of scholars interpret the increased
importance of addressing social and environmental responsibility in the
economy as a result of changing preferences. Stehr (2008), for example,
claims that changing consumer and investor preferences forced economic
actors to adapt market practices so that they would fit a new, moralized way
of thinking about economic activities. A second explanation holds that the
shift is a product of the increasing scope for exchanging information and for
generating outrage about malpractice through activism, particularly online.
Scholars who support this argument assume that consumers might have been
in favour of responsibility for a long time, but that it was only the rise of the
internet that allowed them to exchange information on business practices (cf.
Beder, 2002; see also Ferraro & Beunza, 2014, for a discussion on the transfor-
mative power of activist movements and shareholder engagement).3
In addition to these two explanations with their strong focus on individual
preferences and the respective market responses, a third body of literature
working with the terms ‘social finance’ and ‘social investment’ has
evolved. Alex Nicholls (2010), in particular, coined these concepts to
describe the increasing popularity of reconciling what is considered to be
social and what is understood to be financial. To Nicholls, ‘social invest-
ment’ is characterized by its ability to potentially create a social as well as
a financial return (see also Emerson, 2003). This claim is now shared by
many of the scholars who work on social investment. As Kiernan (2009,
p. xiii), for example, argues,
 Stefan Leins: ‘Responsible investment’ 75

[e]nvironmental and social issues and problems are not ‘just’ problems on those
levels alone; they are also absolutely – and increasingly – critical to the competi-
tiveness and financial performance of both individual companies and the broader
economies and societies in which they operate.

A positive aspect of the literature on social investment is that it has emanci-

pated itself from a simplistic view of financial and moral considerations as a
rather abstract interplay between stakeholder preferences and ‘the market’.
Moore, Westley and Nicholls (2012), for example, point to the role of financial
practitioners who frame such discourse and practices. In doing so, they accept
that market intermediaries do not merely link supply and demand, but actively
contribute to how market practices evolve in the first place. Also, they highlight
that the increased importance of addressing normative claims is not simply the
outcome of rational action within changing institutional norms, but the result of
many – often conflicting – rationalities (Nicholls, 2010).
The main shortcoming of the literature on social finance is that it often
assumes that attempts to measure and quantify social and environmental con-
siderations lead to positive outcomes on all levels. Sandberg et al. (2009), for
example, claimed that socially responsible investment is a heterogeneous field
that lacks ‘standardization’. To solve this apparent issue, the authors proposed
that ‘a good way of mainstreaming SRI [socially responsible investment] could
be to seek to integrate SRI-type concerns in mainstream investments by
employing the conventional language of finance, without heavily drawing
upon SRI jargon’ (p. 530).
Employing the conventional language of finance is exactly what happened
after the financial crisis began in 2008. As I will show, the concept of ESG
has played a critical role in enabling this apparent harmonization of moral con-
cerns and financial forms of valuation. In contrast to the scholars working on
social finance, however, I argue that the very practice of valuation allowed finan-
cial analysts to transform moral motives and turn ESG-based valuation into a
tool of speculation that does not primarily empower moral considerations, but
rather optimizes financial gains. This transformative power has made ESG
different – and far more successful – than earlier concepts of ‘responsible invest-
ment’. While all previous concepts were built on the idea that moral values and
financial value were different spheres, ESG helped to economize moral con-
siderations in order to establish a post-crisis ethical order.
In the following, I will give an ethnographic account of the transformation of
‘responsible investment’ by highlighting three phases in the process of setting
up a ‘responsible investment’ strategy in a Swiss bank. The data I present
were collected during 24 months of fieldwork that took place between 2010
and 2012. During this time, I was allowed to take ethnographic notes, talk to
analysts, analyse documents and reports used in the financial analysis depart-
ment and move freely around the bank. I also actively participated in the ana-
lysts’ daily working processes, which allowed me to internalize the valuation
practices used by financial analysts.4 I kept a research diary for the two years
76 Economy and Society

I was with the bank and noted observations and data gathered from informal
talks, meetings and presentations. Some of the discussions I will refer to were
originally held in Swiss, German or French. I have translated them for this
paper.

‘A bank, not a church’: discomfort meets enthusiasm

I entered Swiss Bank5 in 2010 to conduct fieldwork in the bank’s financial analy-
sis department. At the time I joined Swiss Bank, ‘responsible investment’ had
already grown to become a significant financial market trend. Some smaller
banks in Switzerland were offering ‘socially responsible investment’ services
to their clients, and a number of globally operating banks were offering invest-
ment strategies that were usually labelled either as ‘socially responsible invest-
ment’, ‘responsible investment’ or ‘sustainable investment’. Swiss Bank had
chosen not to try and position itself as a leader in this market.
In 2010, however, it became clear that ‘responsible investment’ was not
just a need specific to a small community of investors, but also a concept on
the way to becoming a mainstream investment strategy. On the one hand,
this mainstreaming was certainly driven by investors’ demands. On the
other, the financial crisis motivated national and supranational organizations
to call for more responsibility in finance, which put pressure on financial
market institutions and financial journalists to reflect on this particular
topic. Most importantly, the Principles for Responsible Investment – a volun-
tary initiative launched by the United Nations Environment Programme
Finance Initiative (UNEP FI) and the UN Global Compact, whose signatories
promise to incorporate six principles of responsible action in finance into their
business practices – gained momentum after the onset of the financial crisis
(UN, 2016).
During that time, expressions such as ‘social responsibility’ and ‘sustainabil-
ity’ entered the vocabulary of journalists at the Financial Times, the Wall Street
Journal and CNBC. As a consequence, Swiss Bank decided to set up a ‘respon-
sible investment’ service for its clients. The bank’s intention here, as communi-
cated by the management, was not to become a leading service provider in a
niche market, but to reaffirm its position as a ‘universal banking institution’
that fulfils client demands of all kinds. As a response to the trend towards
‘responsibility’, a number of Swiss Bank employees were instructed to think
about what form the bank’s approach to offering clients ‘responsible invest-
ments’ might take.
Among the people who were instructed to help develop this ‘responsible
investment’ concept were the members of the thematic financial analysis
team, a group of analysts who look at financial market movements in
terms of thematic clusters – such as technical innovation, demographic
trends and social change. During numerous meetings with other groups
involved in designing the strategy – such as members of the bank’s asset
 Stefan Leins: ‘Responsible investment’ 77

management, investment banking and client advisory departments – discus-

sions revolved around framing and possible target groups for the planned
offering.
Within the financial analysis department, this initiative to develop a ‘respon-
sible investment’ concept provoked discussions among analysts who were
directly involved in the process and among those who were not. At this
point, many of the analysts felt somehow uncomfortable about the trend
towards ‘responsible investment’, arguing that it was a ‘normative approach’.
In various meetings I attended, analysts raised their concerns, arguing that
Swiss Bank was ‘a bank, not a church’. Many of the analysts felt that considering
moral guidelines on investing would involve taking a very different approach to
the one they were used to in their everyday work. Even worse, some considered
it as a threat to their activities in general. As Patrick, a senior analyst responsible
for automobile stocks, put it: Talking about ‘responsible investment’ implied
that all other forms of investing were by definition irresponsible. He felt that
by setting up and promoting a ‘responsible investment’ service, the bank
would risk upsetting its clients rather than expanding its offerings and attracting
new clients.
Many of the analysts agreed with Patrick, calling ‘responsible investment’
hypocritical and nothing more than a deceptive marketing strategy. The
department managers, however, did not share the concerns expressed by
Patrick and many of the other analysts. To them, ‘responsible investment’
was a way of expanding services to existing clients, attracting new clients
and positioning Swiss Bank as an institution that considers social and
environmental concerns when setting up investment strategies. This enthu-
siasm was highlighted by the fact that almost all meetings held to discuss the
‘responsible investment’ offerings included a number of senior managers
who did not usually participate in developing investment concepts. This
gave the analysts involved in developing the concept the rare opportunity
to be recognized by their superiors.
Among the more enthusiastic members of Swiss Bank, two particular groups
stood out. One was a group of client advisors, who instruct institutional clients
such as pension funds or foundations on how to invest their money. To them, a
‘responsible investment’ strategy was a way of meeting a demand that they said
had existed among their clients for a long time. The other group was the finan-
cial analysis department’s thematic research team. They saw ‘responsible invest-
ment’ as a thematically driven way of investing and therefore as a core team
competence. In cooperation with the senior managers, these two groups thus
decided to tackle the task of developing a ‘responsible investment’ concept.
First, they conducted a peer analysis. The peer analysis (i.e. a study of market
competitors that were already providing their clients with a ‘responsible invest-
ment’ service) revealed that many of their competitors did not train their own
analysts to evaluate financial products in terms of their ethicality, but rather
cooperated with external data providers and rating agencies. While these
banks paid external providers to produce analyses, the banks themselves
78 Economy and Society

focused exclusively on commodifying the results and marketing the correspond-

ing financial products. Based on this insight, the members of the group aiming
to develop a ‘responsible investment’ offering at Swiss Bank met with external
rating agencies and data providers to find out more about their valuation pro-
cesses and service costs.
In the last few months of 2010, financial analysts started to invite external
data providers to visit Swiss Bank in Zurich and present their vision, data
and methodology for ‘responsible investment’. These meetings took place
in Swiss Bank’s prestigious meeting rooms that are specifically designed
for hosting external parties. Unlike the meeting rooms for internal meetings,
these rooms are luxurious and equipped with the latest technology.6 The
invited companies took very different approaches to presenting their ser-
vices. The Swiss Bank analysts who attended the meetings were highly scep-
tical of the companies that argued the economy should not harm society and
the environment. ‘Do-gooders’ and ‘tree huggers’ were among the nicer
expressions the analysts used to describe the representatives of these insti-
tutions after the meetings.
The companies that highlighted how a bank’s reputation could be impacted
by malpractice were usually more successful. All analysts were aware that BP’s
oil spill in the Gulf of Mexico, which happened in spring 2010, caused its share
price to lose approximately 30 per cent of its value. This dramatic decline was
visualized and presented with pleasure by some of the external companies – and
it impressed many of the analysts. They felt that if ‘responsible investment’ was
seen as a strategy for foreseeing reputational issues, it could open the door for
integrating social and environmental data into financial analysis without risking
mockery for being ‘normative’.
While the analysts praised the richness of the social and environmental data
presented by some of the external agencies, they were rather sceptical about the
investment implications that the agencies drew from it. Tobias, one of the
leading analysts involved in developing the ‘responsible investment’ strategy
at Swiss Bank, once told me after a meeting with an external company that
many analysts used a ‘negative screening’ approach. Negative screening,
Tobias explained, aims to exclude poorly performing companies from the port-
folio. However, he said that this practice was old-fashioned and did not fit the
philosophy of Swiss Bank’s analysts. Rather than excluding the ‘bad’ companies,
Tobias argued, ‘responsible investment’ should reward companies that try to
improve their performance on social and environmental issues and should
take into account the difficulties of doing this, especially within certain business
sectors such as the extractive industry. Instead of focusing on exclusionary cri-
teria, Tobias wanted to use a relative measure that would make it possible to
compare the ‘responsibility’ of companies within each business sector. This is
known as the ‘best-in-class’ approach. While Tobias was convinced that inte-
grating data on social and environmental considerations could create opportu-
nities at Swiss Bank, he was largely unhappy about the methodology used by
external providers and other banks.
 Stefan Leins: ‘Responsible investment’ 79

ESG: framing ‘responsible investment’

As Swiss Bank was developing its own ‘responsible investment’ strategy, ESG
was becoming increasingly popular. Unlike earlier concepts of ‘responsible
investment’, ESG was introduced as a ‘neutral’ way of looking at a company’s
non-financial performance, and it soon conquered the (discursive) world of
finance. In 2011 and 2012, the concept was increasingly mentioned in financial
media, and the term ESG started to appear in many investment reports. For the
analysts who denounced ‘socially responsible investment’ as being ‘normative’,
ESG offered a new approach to understanding ‘responsible investment’. It was a
way of introducing data on environmental, social and governance issues that was
welcomed by ‘responsible investors’ as well as by investors concerned about
reputation-related financial losses. Perhaps most importantly, however, ESG
involved a simple set of data rather than a norms-based concept.
Table 1 shows the kind of ESG framework that has circulated in many
‘responsible investment’ reports since 2010. It displays three columns
showing potential issues and opportunities linked to environment, society and
governance. It is typical that the issues and opportunities listed in the frame-
work are fuzzy. Rather than precisely defining issues and opportunities, the fra-
mework identifies a number of potential areas to take into consideration. This
fuzziness – at least during the time I conducted my fieldwork – was intentional,
since it allowed analysts to apply the framework when valuing different entities,
e.g. companies working in different sectors, or governments (scholars of man-
agement and organization studies call this ‘strategic ambiguity’; cf. Eisenberg,
2007).
I heard the term ESG for the first time during a meeting with a group of ana-
lysts from a leading US investment bank. Two members of a sell-side analysis7
team had been invited by Swiss Bank to present a framework in which they
aimed to combine two levels of analysis. On the one hand, they stressed the

Table 1 Example ESG framework

Environmental Social Governance
Carbon emissions Health and safety Board composition
Energy efficiency Labour conditions (operational) Corruption scandals
Climate change risk Labour conditions (supply chain) Compensation schemes
Water stress Product quality and safety Diversity management
Raw material sourcing Privacy and data security
Waste Impact on communities
Opportunities in Opportunities in health
environmental
technologies
Opportunities in Improvement of access to
renewable energy communication, healthcare and
finance
80 Economy and Society

role of conventional fundamental analysis.8 On the other, they analysed ESG

data by defining a number of environmental, social and governance issues
linked to publicly listed corporations. In doing so, they stressed that ESG is
not about applying moral standards in valuation, but about being able to antici-
pate what non-financial information could eventually materialize in the markets
or hurt a company’s reputation. Since their framework only considered compa-
nies that also performed well in terms of fundamental analysis, the analysts pre-
sented investment recommendations for ‘responsible investors’ that surprised
me. According to them, companies such as BHP Billiton, HSBC, Roche and
ABB were the ‘winners’ and should therefore be recommended to all investors
focused on ‘responsible investment’.
During the meeting, it became apparent that introducing ESG as a concept
had the potential to frame ‘responsible investment’ in significant ways. Rather
than treating ‘responsible investment’ as a moral demand, it operationalized
issues linked to this moral demand in a manner that mirrored the way in
which financial analysts normally dealt with financial data. After the meeting,
Andy, a young analyst who was very enthusiastic about introducing a ‘respon-
sible investment’ strategy at Swiss Bank, told me how impressed he was by the
sell-side analysts’ framework. To him, ESG was a way of harmonizing the inves-
tors’ aim of maximizing financial profit with the aim of ‘being kind to the
environment and society’. This, Andy stressed, would help him to sell the
idea of ‘responsible investment’ to investors who were concerned about
society and the environment, and to investors who were only interested in finan-
cial gains. As Richard, who was the head of the financial analysis department and
similarly enthusiastic about ESG, later stressed: ESG indicated that ‘doing
good’ would no longer necessarily exclude ‘doing well’.
Swiss Bank’s management welcomed the growing popularity of ESG. They
saw it as a way of providing ‘responsible investment’ solutions without having to
deviate from the profit-driven approach of existing investment strategies. Fur-
thermore, analysts who were previously sceptical about the ‘normativity’ of
‘responsible investment’ became convinced that ESG could help integrate
environmental and social concerns into existing valuation practices and could
even be used to predict market movements. This line of argumentation
proved highly successful, and by mid-2011 most of the scepticism within the
financial analysis department had dissipated.
After a period spent focusing on peer analyses and meetings with external
data providers and sell-side analysts, the Swiss Bank analysts started to work
on their own concept of ‘responsible investment’ that could be used for market-
ing the strategy and incorporating it into the investment selection process. As
instructed by the management, this work took priority over other projects,
which meant that the analysts involved were given additional time to conduct
research beyond the temporal pressure of the market. First, the analysts
engaged in conceptual work and defined the terminology to be used. Around
this time, concepts such as ‘socially responsible investment’, ‘religion-based
investment’ and ‘impact investment’ began circulating in the financial
 Stefan Leins: ‘Responsible investment’ 81

markets, and Swiss Bank had to find a concept that unified all of these invest-
ment strategies.
While the members of the bank’s marketing department and the client advi-
sors focused on branding the concept, which included defining its visual
appearance and a marketing strategy, the financial analysts were responsible
for creating an investment rationale. They therefore began researching how
the ‘responsible investment’ trend had emerged and how much in terms of
assets was invested in ‘responsible investments’ at that stage. They also began
thinking about how the trend might develop in future. Influenced by the
concept of ESG, the analysts found that their work on constructing a coherent
narrative of ‘responsible investment’ as an investment trend soon became a dis-
cussion about how considering ESG data might not only be useful with regard
to moral concerns, but also as a strategy to increase financial returns. Tobias,
Andy and many of the other analysts involved argued that the work should
therefore also look at empirical tests of whether ESG data could be understood
as market signals for outperformance.
Hence, Andy, who was particularly enthusiastic about ESG, started to gather
the results of studies by academics and financial market practitioners that tested
the influence of ESG factors on financial performance. To Andy’s dismay, the
studies he found presented mixed results. Tobias, however, as a social scientist
with years of statistical training, did not want to simply rely on the results that
Andy had gathered. He suggested performing his own statistical tests on the
influence of ESG data on financial performance. After several weeks of gather-
ing data and calculating figures, Tobias presented his results to the team. He
said there was indeed no indication of a positive correlation between good
ESG performers and good financial performers. However, he explained that
companies with good ESG performance tended to be less exposed to serious
short-term decreases in value. This was a finding that the analysts could use
to pitch ESG-based ‘responsible investment’ to investors, and it also increased
the value of ESG as a concept for the other analysts to work with. When they
heard that considering ESG data could prevent investors from being exposed to
short-term decreases in value, all analysts became interested in incorporating
ESG data into their valuation practices.

ESG data as market signals

The claim that ESG performance potentially impacts future financial perform-
ance opened the door for all analysts to become interested in ‘responsible invest-
ment’ in summer 2011. From that point in time, the analysis department at
Swiss Bank decided to support the integration of ESG data into existing valua-
tion practices.
Before ESG data could be integrated, however, the analysts working on the
‘responsible investment’ strategy had to decide on where to source the ESG
data. As they learned during their meetings with external providers and sell-
82 Economy and Society

side analysts, collecting reliable ESG data involved a lot of work. The analysts
soon realized that if they wanted to work with ESG information from the 500-
plus companies they had evaluated, they would have to collaborate with an
external partner. They chose a large data provider active in constructing finan-
cial market indices. Having anticipated the growing importance of ESG data,
the provider had bought up a number of smaller companies that specialized
in collecting this type of information. After signing a contract with the firm,
Swiss Bank could access to its pool of ESG data.
The analysts then started to use the data in three distinct ways. First, the the-
matic research team launched a specialized publication series on ‘responsible
investment’. Second, the analysts included ESG data as additional market
signals in all their publications. Third, they started to incorporate ESG data
into their investment narratives (cf. Leins, 2018).
The thematic research team’s specialized publication series was designed to
target ‘responsible investors’. They decided to look at large companies active in
the same business sector and evaluate them in terms of both financial performance
and ESG performance. To do so, they created a spreadsheet that combined finan-
cial and ESG data for each company and then began to play with the data.
For Tobias and the other analysts involved, this playing with the data proved
to be highly experimental. However, there was a clear guideline that any
company that was later recommended in the specialized report for ‘responsible
investors’ should be valued positively in terms of both ESG performance and
potential financial gain. After numerous meetings and discussions, Tobias
and the team agreed on the following approach: For a company stock or
bond to be recommended as a ‘responsible investment’, it had been rated
either as AAA, AA or A by the ESG data and ratings provider. Moreover,
the company should not be involved in ‘severe controversies’, a measure that
was also supplied by the external provider. The analysts chose to apply this
exclusionary criterion because many of the companies involved in controversial
business practices had particularly good ESG ratings for transparency, ‘corpor-
ate social responsibility’ reporting and sponsoring of community events. This
was because they put an extra amount of work into such activities in order to
‘whitewash’ their name. The ability to consider controversies, measured as
the number of conflicts a company has with NGOs, enabled analysts to
define a company’s ESG performance beyond its willingness to set up reporting
measures and engage in community activities.
Using these criteria, the analysts in the thematic research team then started to
produce best-in-class ratings for the different business sectors. Their aim was to
show which company in a given sector performed better than the rest. For the
publication, the analysts wrote a two- to three-page report that contained a
general introduction to ESG-based investing, an introduction to the business
sector under review, and a ‘basket’ of stocks or bonds they recommended inves-
tors to buy. Due to the link between ‘regular’ valuation practices and a narrative
that stressed ESG issues and opportunities, these publications turned out to be
highly successful.9
 Stefan Leins: ‘Responsible investment’ 83

Table 2 shows the kind of ESG best-in-class basket that Swiss Bank pro-
moted in 2012. The first column shows the name of the company, the second
shows the stock ticker (a financial market identification number), the third
shows the company’s domicile and the fourth shows the sector in which the
company operates. The fifth column shows the investment recommendation
of the analyst responsible for the company. Swiss Bank’s analysts use a
ternary system for investment advice: ‘Buy’ means that investors are advised
to buy more stock from the company; ‘sell’ means that investors are advised
to sell the stock because the price is expected to decrease; ‘hold’ indicates
that the share price is expected to stay more or less the same for the time being.
The analysts’ recommendation is followed by three columns displaying finan-
cial information: The current market price of one share in the company’s local
currency (price), the expected P/E ratio for 2012 (P/E 2012E) and the expected
dividend yield for 2012 (Yield 2012E). The P/E ratio stands for ‘price-to-earn-
ings ratio’ and is often taken into account by fundamental analysts when produ-
cing their forecasts. Put simply, it is used to calculate how much an investor
needs to pay per stock in relation to the company’s earnings per stock. The
expected dividend yield, shown in column eight, is a ratio that gives investors
an idea of how much dividend per share (in per cent) analysts expect the
company to pay by the end of the year.
For the purposes of this paper, it is interesting that in the ESG basket dis-
played in Table 2, the financial information and ratios used for valuation are fol-
lowed by an ESG rating and a note on whether the company is mired in
controversy or not. Here, moral concerns, seen through the lens of ESG, are
presented as market signals comparable to financial market information and
valuation ratios. Like the share price or the P/E ratio, these moral concerns
have now entered the repertoire of market signals that analysts can use when
constructing forecasts.
In addition to the specialized reports for ‘responsible investors’, the Swiss
Bank analysts also integrated ESG data and ratings into their everyday valuation
practices. This was achieved as follows: The management asked the analysts to
include the ESG data from the external provider in every investment report
they published. The reports use standardized templates that involve both a nar-
rative and financial data such as the current stock price, the company’s perform-
ance and various other figures (such as earnings, dividends paid and sales
volume). The management said that the reports should provide transparency
about how a company is rated in terms of its performance on social, environ-
mental and governance issues.
Once again, this provoked discussions among the analysts. Marcel, a senior
analyst responsible for the valuation of numerous Swiss companies, was particu-
larly worried. In one discussion, he explained that many of these Swiss compa-
nies, which were often preferred by investors as safe investments, performed
rather poorly in terms of ESG. As a consequence, the analysts agreed that
the box showing the ESG rating in the report should highlight the good
ratings in green and leave the poor performances in a normal font (i.e. no red
 84
Economy and Society
Table 2 Example of an ESG best-in-class basket
Company Ticker Country Industry Rec. Price P/E 2012E Yield 2012E ESG rating Controversies
ACTELION ATLN VX Switzerland Healthcare BUY 38.4 15.8 2.0 AAA No
BASF BAS GY Germany Materials BUY 62.2 10.3 4.1 AAA Few
CENTRICA CAN LN UK Utilities BUY 3.1 11.2 5.3 AAA No
PRUDENTIAL PRU LN UK Financials BUY 7.6 11.4 3.5 AAA No
SAB MILLER SAB LN South Africa Consumer staples BUY 325.1 20.2 2.1 AA Few
 Stefan Leins: ‘Responsible investment’ 85

highlighting would be used). Marcel was not particularly happy with this idea,
but pressure from the management meant he was forced to accept it.
With ESG data and ratings now included in the reports, ESG was considered
(beyond the specialized reports) as a conventional market signal. Rather than stres-
sing its normative foundation, analysts now used it as an additional piece of infor-
mation that could potentially help indicate how a particular stock price might
develop in future. This meant that it became a speculative tool: It fed imaginations
about possible futures, rather than serving as a measurement of morality.
This transformation was fostered by the fact that understanding ESG data as
market signals allowed financial analysts to use it in a similar way to how they
used financial and macroeconomic data when constructing their investment
advice. After summer 2011, I saw how financial analysts, regardless of what
they had first thought about Swiss Bank’s ‘responsible investment’ strategy,
started to enrich their investment narratives with ESG components. In order
to make a positive case for the way a company’s stock price would develop, ana-
lysts began using ESG data to highlight a company’s ‘recent reduction in carbon
emissions’, its ‘new initiative to foster equal employment opportunities’ or its
‘sponsoring of community activities’. If analysts were negative about a com-
pany’s future stock performance, they now referred to the company’s ‘lack of
transparency in terms of environmental stress’, the ‘continuing controversies
surrounding the company’s impact on farmers located around its production
sites’ or the company’s ‘lack of willingness to improve working standards’.
ESG data therefore served as a repertoire of market signals that could help
strengthen the narrative foundation of speculation.
To the analysts, the good thing about ESG was that, for almost any company,
ESG data offered both positive and negative factors that they could use to
strengthen their narratives. I realized this when, after ESG data had been intro-
duced at Swiss Bank, analysts who had previously had no interest in ‘respon-
sible investment’ started to approach the thematic research team to ask
questions about a company’s ESG performance. Rather than being interested
in getting an objective assessment, they often searched for particular pieces of
information that would strengthen their initial narrative. ‘Can you give me a
positive ESG fact on BMW?’ Patrick once asked the team. As soon as he got
the information, he said: ‘This is great – I can use this to recommend clients
to invest in BMW, which is financially promising’.

Conclusion: towards a post-crisis ethical order

The ethnographic data I have presented show how a new valuation regime
emerged at Swiss Bank after the financial crisis began. This new regime com-
bined conventional practices of valuation with a critique of capitalism. Also,
as my account illustrates in detail, it combined calculative strategies with tech-
nologies of imagination, which allowed the new valuation regime to become a
mainstream financial market practice.
86 Economy and Society

First, ‘responsible investment’ had to become detached from the normative

image of the previous ‘responsible investment’ approach. In contrast to
earlier conceptual frameworks, ESG allowed analysts to look at data on environ-
mental, social and governance-related performance in the same way as they
looked at other informational sources, and therefore to understand ESG data
as market signals. Once they had been accepted as such, ESG data entered
the broad repertoire of market signals that analysts potentially look out for
when estimating the present and future value of companies or bond-issuing
governments.
Next, the concept gained a great deal of importance because of its potential to
contribute to the narrative basis upon which investment advice is built. The
ability to refer to information on environmental, social and governance issues
and opportunities helped analysts to strengthen their investment narratives
by linking them to issues such as social and environmental responsibility.
This made ESG more appealing to analysts who had previously been against
including moral considerations in valuations. The fact that ESG provided ana-
lysts with data that could be included in existing narratives and used to create
new ones allowed ‘responsible investment’ to become a mainstream framework
among financial analysts and other financial market participants.
Throughout this process, the success of the new valuation practice depended
on the fact that, beyond calculation, financial analysts had to create new expec-
tations and narratives of the market, and to portray ‘responsible investment’ not
as an approach that simply bridges conflicting interests, but as a strategy that
creates something new by building on different ethical orders. This is particu-
larly clear in the way that financial analysts operationalized the data so that they
could treat the information in the same manner as they already treated financial
and economic data. The concept of ESG provided them with tools for breaking
the link between efforts to incorporate environmental and social concerns into
valuation, and the normative approach advocated by earlier ‘responsible
investors’.
Analytically speaking, however, the rise of ESG did not mark a withdrawal of
moral standards. Rather, it converted values from one ethical and often expli-
citly ethico-political order provoked by the crises of capitalism into a competing
one. In an Economy and Society paper published in 2002, Bill Maurer argues that
financial market trading practices (in particular derivatives trading) are built on
a model of a probabilistic ordered universe of God’s law. This ‘theological
unconscious’, Maurer says, is repressed in order to separate ‘God from
number’ (Maurer, 2002, p. 30; cf. Miyazaki, 2007). What is important regarding
my line of argument is that Maurer illustrates how financial markets themselves
represent a (repressed) ethical order (a point which was similarly stressed by
Foucault in 2008).
As shown in the empirical part of this paper, this ethical order of the market is
based on the belief that the market itself represents a norm-free space that is
guided by information seeking, information processing and calculation. This
‘spirit of calculation’ (Appadurai, 2012, 2016; Weber, 1958) is the ideological
 Stefan Leins: ‘Responsible investment’ 87

foundation of capitalism. At a time when responsibility became more explicit in

public discourse, ESG succeeded in integrating a critique of capitalism into
valuation practices while at the same time adhering to this spirit of calculation.
Embedding a number of concerns raised by movements such as Occupy Wall
Street (cf. Graeber, 2013; Juris, 2012) into the ethical order of the
market allowed hostile attacks to be absorbed by fostering a new ethical form
of valuation. ESG thus led to the establishment of a post-crisis ethical order of
the market that exploits social contentions and crisis-related discourse in
order to create new speculative opportunities and profit.

Acknowledgements

I would like to thank Laura Bear, who encouraged me to write about ‘responsible invest-
ing’ and provided me with some of the analytical tools to do so. Also, I would like to thank
Ellen Hertz, Emilio Marti and Gisa Weszkalnys for offering their insightful comments at
various times during the writing phase of this paper. Earlier drafts of this paper have been
presented at the Swiss Anthropological Society panel ‘Transnational Corporations,
Large-Scale Capitalist Projects and Local Transformations’, organized by Bettina
Beer, Tobias Schwörer and Doris Bacalzo, and at the LSE workshop ‘Speculation:
New Vistas on Capitalism’, organized by Laura Bear and Gisa Weszkalnys. I am grateful
to all the participants at these meetings for their helpful comments.

Disclosure statement

No potential conflict of interest was reported by the author.

Notes

1 I touch on this role of narratives in an earlier paper on the construction of market

forecasts (Leins, 2013) and in my book (Leins, 2018).
2 Historically, the focus on investor preferences (which include companies’ ‘responsi-
bility’) is closely linked to the emergence of the ‘shareholder value’ concept. As Lazonick
and O’Sullivan (2000) explain, this concept dates back to the 1960s, when many companies
based in the United States and the United Kingdom changed their strategy from retaining
and reinvesting profits to distributing profits to shareholders in order stay competitive.
New economic theories, regulatory changes and innovations in finance caused the question
about what shareholders want to gain momentum. Until the end of the twentieth century,
however, most economists and financial market actors seemed to feel that shareholders
wanted a strictly financial maximization of value (Lazonick & O’Sullivan, 2000).
3 Alongside these explanatory approaches, ‘corporate social responsibility’ and
‘responsible investment’ have been the subject of a number of anthropological studies.
These have shown that the broader trend towards ‘responsibility’ in markets should
not simply be understood as a consequence of changing preferences or of scandals.
Instead these approaches argue that it is a new mode of corporate self-regulation. It
88 Economy and Society

marks a new relationship between the market and the state, although authors disagree on
whether it challenges the role of the state (Vogel, 2010), promotes partnership with the
state (Gond et al., 2011) or economizes the political sphere (Shamir, 2008). Other authors
have focussed on these measures in terms of their effect on communities seeing them as
an ‘appeasing gift’ to compensate for suffering caused by a company’s activities (Gardner,
2015, p. 496; Rajak, 2011).
4 Maurice Bloch (1998, pp. 22–26) refers to this method as ‘introspection’.
5 In my academic writing, I refer to the bank as Swiss Bank for reasons of anonymity.
6 At banks, the rooms to which external parties have no access are often in a very poor
condition. This is a direct outcome of the fact that long-term infrastructural investments
are in conflict with short-term shareholder value and bonus payments. As a consequence,
many banks do not adequately invest in infrastructure, which leads to the situation that
very well-paid bank employees often work in very poor environments (cf. Ho, 2009).
7 Sell-side analysts are financial analysts working for investment banks. Sell-side ana-
lysts sell their analyses to other financial institutions and their in-house analysts (some-
times referred to as buy-side analysts). Buy-side analysts, such as the ones I studied at
Swiss Bank, produce forecasts for the bank’s own client advisors and clients.
8 Fundamental analysis is a market practice that aims to value stocks, bonds and other
financial market products on the basis of financial data (such as a company’s earnings,
sales or cash flow) and macroeconomic data (such as interest rate development or
growth estimates). Fundamental analysts build on the assumption that valuing this
data makes it possible to estimate a company’s intrinsic value, which can then be com-
pared to a company’s market value, i.e., to the actual price of a stock or bond. If a funda-
mental analyst estimates the intrinsic value to be higher than the current market value, he
or she would recommend investors to buy, assuming that the market value will adjust to
the intrinsic value over time. If the analyst feels that the market value is higher than the
intrinsic value, he or she would advise investors to sell the stocks or bonds, expecting the
market value to decrease over time (cf. Bodie et al., 2002; Copeland et al., 2000; Leins,
2018; Wansleben, 2012).
9 An analyst’s success is usually not measured by the accuracy of his or her forecasts, but
by the number of clients requesting his or her reports. So, if analysts are described as suc-
cessful, it means that many investors request or download their reports (cf. Leins, 2018).

ORCID

Stefan Leins http://orcid.org/0000-0002-3653-865X

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Stefan Leins is Assistant Professor in Anthropology at the Department of Sociology of

the University of Konstanz, Germany. Leins works on commodity trading, supply
chains, financial analysis, forecasting practices, Islamic finance, socially responsible
investing, the history of economic knowledge and the narrative dimension of finance.
His first book Stories of capitalism: Inside the role of financial analysts was published by
the University of Chicago Press in 2018.