Environmental, social and governance (ESG) investing is ascendant. Its mirror image, stakeholder capitalism, is now the standard mantra on boards and in executive suites. This is not cause for celebration. Both rest on weak conceptual foundations and should be viewed suspiciously by investors who seek adequate returns and by citizens who want real rather than cosmetic change.

The business and financial establishments endorse the new consensus. BlackRock, the world’s largest asset manager, released an open letter warning companies that it would “be increasingly disposed” to vote against boards moving too slowly on sustainability. The World Economic Forum in Davos says companies exist to create value not just for shareholders but “employees, customers, suppliers, local communities and society”...

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