Toward an Ethical Economy of Sustainable Finance: From ESG Reporting and Investments to Due Diligence Regulation of the European Union

Why invest in companies that have high performance on ESG-criteria, or why prioritize businesses that follow due diligence regulation? What is the rationality of sustainable investments? Is it good business, both in terms of ethics and economics, to invest in companies that are strongly committed to Environmental, Social, and Governance (ESG) and due diligence strategies? This chapter discusses the increased development toward using ESG as fundamental criteria for sustainable finance and investments. To discuss this ethical economy of ESG investments, the chapter analyzes the development from ESG reporting to due diligence regulation of the European Union (EU). The aim is to go more deeply into the recent developments in socially responsible investments and relate them to ESG investments in the framework of due diligence requirements. Thus, the chapter begins with an analysis of the ethics and law of ESG and Sustainable Development Goal (SDG) behavioral regulation as the foundation for an ethical economy of sustainable finance. Following up on the discussion of recent developments in ESG and due diligence, this chapter will also relate the sustainable investments to the perspective of development of the ethical economy of stakeholder management. With this, we are moving from a narrow shareholder perspective on investments to a broader stakeholder view on ESG investments in the perspective of due diligence reporting and practice in the EU.