Do environmental, social, and governance (ESG) priorities compete with long-term value creation?

While some companies may be tempted to cut back on ESG initiatives in order to boost short-term earnings (just as with any other investment), managing exclusively for short-term earnings is antithetical to long-term value creation. For companies to earn and to continue to merit their social license—and, in turn, deliver value for their investors—they must meet the needs of a wide range of stakeholders; recognize environmental, social, and governance expectations; and understand how those expectations can shift. No organization can remain in business unless it follows law and ethical custom.

Today, the existential dangers of climate change and the need to reach net-zero emissions are clearly top of mind. But as we have shown for decades, forward-thinking companies have been addressing first-, second-, and third-order consequences of climate change, including existing or potential regulation, in a thoughtful, value-creating way.

This deliberative approach holds true as companies consider each of the ESG dimensions. When calibrated to the unique requirements of a distinct business model, ESG does not compete with long-term value creation. Rather, ESG can help unlock value, with positive effects for stakeholders, society, and the planet.

In this section

Article - McKinsey Quarterly

Five ways that ESG creates value

– Getting your environmental, social, and governance (ESG) proposition right links to higher value creation. Here’s why.

Investors remind business leaders: Governance matters

– Activists continue to poke holes in corporate performance and returns, but they are having their greatest success with governance structures. Here’s how to think about their moves.

The state of internal carbon pricing

– More and more companies are experimenting with internal carbon charges—but are their pricing thresholds correct?

When sustainability becomes a factor in valuation

– Sustainability efforts are material to investors only to the extent they affect cash flows. What matters depends on the industry.

Investing in sustainability: An interview with Al Gore and David Blood

– The former vice president and his partner in an investment-management firm argue that sustainability investing is essential to creating long-term shareholder value.

How climate change could affect corporate valuations

– Efforts to reduce climate change can profoundly affect the valuations of many companies, but executives so far seem largely unaware.

McKinsey on Finance 20th anniversary

Lessons and challenges


Reflections on 20 years of McKinsey on Finance—and three challenges ahead

– Revolutionary innovations, brilliant ideas, and climate imperatives will change everything—except the fundamentals of finance and economics.

Compendium insights

Fundamentals of strategy and value creation

How is value created—and destroyed? A closer look at corporate finance, its bond with strategy, and the benefits of value creation.

Strategic combinations and divestitures

Who is, and isn’t, the best owner of a business? Why might the answers change? Lessons about when and how to grow.


A long-term perspective is essential for value creation—all the more so when the challenges and consequences of externalities are increasingly top-of-mind.

CFOs and the evolving finance function

Building a leading-edge, digital-first, and strategy-minded finance function takes a lot more than delivering quarterly and annual reports.

Debiasing investment and strategy decisions

For decades, we’ve been exploring how leaders can push their organizations to debias decisions, particularly on resource allocation and strategy.

Charting growth


Looking back: What does the ‘long term’ really mean?

– Stock markets can be volatile, and some years they decline. But the ups far outnumber the downs—and returns are in line with two centuries of performance.