Does the shift to a stakeholder focus mean shareholders get less?

I continue to be amazed that the notion of companies focusing more on social impact is so widely accepted by CEOs, but still so hotly debated by journalists, politicians, and pundits. As Delta CEO Ed Bastian told me earlier this year, anyone who thinks the stakeholder movement isn’t real “doesn’t run a large company.” 

Consider these facts, from a new McKinsey report out this morning:

• More than 90% of S&P 500 companies now publish ESG reports in some form, as do approximately 70% of the Russell 1000.
• In this year’s first quarter, total assets for funds that say they are focused on sustainability and ESG reached $2.78 trillion.

Some of this, of course, is mere window dressing. But much of it is not. As I’ve written here before, the actions of companies like GM, Walmart, Microsoft, and Maersk—to name a few—make clear that the world of business has changed.

An outstanding question is this: Does the shift to a stakeholder focus mean shareholders get less? There clearly are tradeoffs in the short term. But in the long term, will the increased focus on social impact also drive greater shareholder returns?

Existing studies of the relationship between ESG ratings and financial performance are inconclusive. But the McKinsey study uses a different methodology, comparing the change in a company’s ESG rating to its total shareholder return. Early results: “Companies that show an improvement in ESG ratings over multiyear time periods…exhibit higher shareholder returns compared with industry peers in the period after improvement in ESG scores.”

Critics will find lots to quibble with in this result. First, the finding was valid for only 54% of companies that made significant ESG improvement—hardly an overwhelming percentage. Second, the study showed correlation, not necessarily causation. And third, existing ESG ratings are a muddle of data—a pudding without a clear theme. Still, the early results are intriguing.

And even if the focus on social impact does not always pay off in greater returns for shareholders, there are still compelling reasons to support it. Why? Because the problems facing society—what economists call social “externalities”—are rising. Because win-win solutions are sometimes clearly possible. And because ESG metrics are getting better and will improve over time. McKinsey’s conclusion: “Companies must approach externalities as a core strategic challenge, not only to help future-proof their organizations but to deliver meaningful impact over the long term.”

You can read the full report here. More news below.

Alan Murray
@alansmurray
alan.murray@fortune.com

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This edition of CEO Daily was edited by David Meyer.