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Beyond the buzzwords: Environmental, Social and Corporate Governance have real impact

Beyond the buzzwords: Environmental, Social and Corporate Governance have real impact

Beyond the buzzwords: Environment, Social and Corporate Governance has real impact

Marquette Business instructor Dr. Christopher Merker shares some of his expertise

Dr. Christopher MerkerMarquettes College of Business Administration is his main instructor in the sustainable finance program. He is also the director at Robert W. Baird Private Asset Management and holds a Ph.D. degree in investment governance.  


He is a leader in the industry, serving as the executive director of Fund Governance Analytics, an ESG research partnership with Marquette. He is also a member of CFA Institute ESG Working Group, which is an international committee that explores ESG standards. 

Merker answers questions about the importance of ESG and industry trends. He also discusses how it aligns to Marquettes Catholic, Jesuit mission.  

Can you explain to people who are unfamiliar with Environment, Social and Corporate Governance (ESG), what it is and its importance? 

ESG must be explained in context.  

Typically, the value of a company is based on the amount of earning power it has how much money it’s making today and into the future. Stocks are valued based on what traders think these companies are worth at any given moment. This is reflected in their market value. How much of that value can be explained by tangible assets has changed over time. One example of an intangible asset would be brand value, which is how consumers feel about a company. Tangible assets are the things companies own, such as machines, factories, or equipment, which have intrinsic value.   

Our understanding of companies today shows that the most valuable assets are their intangibles. It’s more about the people who are working for those companies and contributing their ideas and intellectual capital. So, it’s less of the tangible assets bringing value.  

This brings us back to the question: What is ESG? 

ESG is a financial tool that allows us to understand the value of our companies today. It considers things such as the social and environmental impact of companies. It examines how they treat workers and comply with their obligations to deliver quality products and services to consumers. It also looks at governance factors. It also asks about the company’s management and whether they are responsible corporate citizens. 

When did your interest in ESG begin? How did you get started in the industry? 

Marquette formed a partnership in 2006 with CFA Institute to become the first CFA program partner for undergraduates. We created the Applied Investment Management (AIM) program, which offered the first Investment Ethics Management Society course the first sustainable finance course ever offered in the United States and the course I’ve been teaching since 2009. Marquette has been teaching ESG principles for longer than any U.S. University. 

The early 2000s corporate governance crises were what drew me to ESG. I began to wonder whether we were experiencing a problem with social stability in relation to our markets. 

I became interested in it personally and Marquette offered me the chance to teach. A wonderful partnership was formed when I came in to teach Corporate Governance and Socially Responsible Investment Practices. I completed my Ph.D. work in governance with Dr. Peck as well as other faculty members. 

In 2009, you began teaching Sustainable Finance. You started teaching Sustainable Finance in 2009. 

Nobody was really interested when I started teaching ESG in 2009. It was still a new field. In the last five years, it’s really changed. And now suddenly it’s on everybody’s radar. 

You wouldn’t notice any differences if I showed you the syllabus for this year’s class compared to the original class taught by Dr. Peck. That’s how well designed it was from the beginning. The content of what we cover has obviously changed over time. The industry has seen rapid and robust growth in data, information, and its own evolution.  

The CFA Institute reports that the COVID-19 Pandemic has intensified discussion about the interconnectedness between sustainability and the financial system. Could you please explain how the pandemic impacted ESG investing? 

With COVID, we have seen a clear acceleration over the past two year. On the one hand, the pandemic has been very destabilizing to society, and we’ve seen those impacts in our cities and on international security. It has brought to light the interconnectedness of the globe and the dangers that surround it. It has increased awareness of the potential risks. People are now more aware of the dangers of climate change and how viruses can spread.  

Some of it is a combination of more awareness of the risks that I think COVID has revealed, but I also think we’re responding to changes that are happening around us. People can see wildfires or droughts.  

What global standards have you helped to develop as a member in the ESG Working Group for CFA Institute? 

CFA Institute’s goal was to create a set product disclosures. , There are standards for investment products. These standards would answer questions such as “What is a sustainable investing product?” Are you trying to make a difference in the world? Are you integrating ESG information to improve risk management? Are you trying make a difference or reduce risk? 

Over the year-long collaboration, we developed a set or principles to guide product investment disclosure. Those standards rolled out in May of 2021, so it’s too early to tell what the impacts have been, but a lot of what we’ve done has been informing investment regulation and securities market regulators like the SEC. With our initial paper, there was a lot of industry interaction and government cooperation.  

Recently, the SEC announced Updated climate-related disclosure guidelines. These changes are a good example of how industry standards are changing in order to meet ESG requirements.  

How does ESG fit into Marquettes mission? 

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I think it’s absolutely a perfect alignment with the mission and values of Marquette, especially with its Jesuit underpinnings. The Catholic guidelines on investing were recently updated by the U.S. Conference of Catholic Bishops. Although they were already in line and in accordance with ESG principles and practices this latest iteration has expanded social and environment issues to be consistent with Catholic Church.  

Marquette has been a member of the Association for the Advancement of Sustainability in Higher Education for nearly a decade. I believe we have been leading the pack for many decades now, and I believe that it will continue.  

Why is ESG not a part of financial reporting? Do you think they will become mandatory to disclose in the near future? 

The world is moving in the right direction towards mandatory disclosure. This is why many companies have already started to do it. They know what’s coming. The lack of standardization is one part of the problem.  

It is becoming clearer under the new administration that it will soon be mandatory in the U.S. by executive order. All government agencies must now adhere to certain practices and principles regarding sustainability issues. The Department of Labor recently investigated requirements for pensions on carbon disclosure.  

Many career milestones have been achieved, including your work on the CFA global board and publication of your book in 2019. What are your proudest achievements? 

I’ve been fortunate to work with so many wonderful people who’ve been so supportive over the years.  One of my most proud achievements is the research that I have done with Dr. Peck to apply corporate governance principles to institutional investors. Some of that work is being recognized. We were honored to partner the Commonfund Institute so that we could take the work weve done here to help organizations evaluate their governance performance.  

It has been rewarding to contribute to the advancement of sustainability education, as well as being able be as involved with the standards through the CFA Institute. When I look back at the 13 years of students who have completed the same program, I can see each one. Knowing that I’ve had some influence on people as they’re going out in the world, making choices and working to improve the profession, is pretty gratifying.  

What are your hopes for the ESG space in the next 10 years? How can Marquette help you drive positive change? 

I’m hopeful that in the next 10 years we will start to make meaningful change. The past decade has seen a greater awareness. Before you can find solutions, you have to recognize the problem. We can now make better decisions as consumers, governments, and companies.  

It all boils down to education, in terms of policy-making and the choices we make. The goal is to make meaningful changes to educate this generation and to make progress on a variety of issues.

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