A Tic-Tac-Toe of ESG

Author: Amien Kacou| UC Berkeley School of Law | LL.M. Candidate 2024 | Posted: July 11, 2023


ESG is the latest framing for an old idea—doing business in a “conscious” way—for the age of data. In business circles, it focuses on trying to account more formally for previously overlooked (or downplayed) interactions between factors linked to the Environment and Society, on the one hand, and the traditional concerns of corporate Governance with financial success and risk, on the other. Institutional investment in this area is projected to grow by trillions of dollars in just a few years;[1] regulators are anxious to police this new activity, even if only to assuage public skepticism; and politicians and ideologues are (of course) polemicizing everything.[2]

This might not sound like child’s play. And yet, the debate “for or against” ESG bears a striking family resemblance to a simple game of tic-tac-toe. Robert Eccles wrote a piece for Forbes in 2022, “The Topology of Hate for ESG,”[3] where he neatly illustrates how even the most informal mathematical modeling of a debate space can help distinguish the “signal and the noise.”[4] Here I try to do the same, but at a much more elementary level—partly to demonstrate where the current debate belongs.

Tic-tac-toe (TTT) is typically a game played in three moves on a 3×3 grid between two sides alternating after each move, with each side represented by a symbol trying to be the first to line up its marks of the symbol in any three squares. On the surface, TTT is a zero-sum game, with a slight first-mover advantage, and a hierarchy of strategies (where to win, starting at the center is always best, corner moves have the second-best prospect, and side moves should never be first).[5] But unlike other zero-sum games (say, the game of chicken—which incentivizes both sides to mutual destruction), tic-tac-toe’s optimal outcome—on both sides—is a nice draw. In fact, for the most competent players, the basic or surface goal of tic-tac-toe (which is to win against one’s opponent) is seldom if ever the real reason for playing the game. Rather, tic-tac-toe is most often played with children (or the child-like), often as a pedagogical tool to teach them a nice lesson about sportsmanship.

Like tic-tac-toe (and even more so), the ESG game is all about trifectas. This is not to say that ESG players just need to focus on getting every letter in the acronym right and in the right order when talking to this or that audience—in fact, this would risk missing the bigger plot. E and S are just avatars of G in different domains, more enlightened extensions of a commonsense tradition that expects corporate governance to heed legal and other risks—except now by asking more explicitly not just what but who (“S”) and where (“E”) the market is. More fundamentally, ESG is about smartly balancing needs over time and place—to be responsive to the broad context even in the short term while remaining accountable in the long term.

Still, priorities (i.e., best first moves or strategies) when it comes to E, S, or G (or sustainability more broadly) seem to vary both in general or on average (with G being most easily aligned with traditional corporate concerns, E benefitting from a wealth of new research about physical risk—though tellingly this has not immunized the matter from ideological dispute—and S being a greater source of contention, on average)[6] as well as depending on the type of player (for example, with retail investors seeming less committed than institutional investors to broadening their outlook in time or categories, and companies in different sectors naturally encountering different issues).[7]

Here, to simplify things, we can summarize every possible type of move, strategy, or player in the “for or against ESG” debate space according to three general categories: empiricism, cynicism, and ideology. ESG is primarily a business-driven[8] initiative in which empiricism is the central and best first move or strategy for all good faith business players. It is the “shut up and calculate” way of doing business. Indeed, the surest way to win is undoubtedly to show results—preferably in numbers (quantified data and dollar figures). However, whether this strategy can win depends not just on the competence of the other side to understand those results (or its good faith) but also on the objective clarity of those results. And here the data remains mixed—again depending on the type of player. For example, Eccles reports that corporate ESG results are more clearly positive than ESG investor results.[9] Maybe it is a matter of time;[10] but bets are being placed today. This is why it is not only important to calculate but also to show one’s work—preferably to a cynic.[11]

Cynicism is the corner move of ESG. Watchdogs are bound to constantly look for ways to justify their role. And they are attracted to novelty.[12] The Securities Exchange Commission and the Department of Justice (regulators and prosecutors) might compete for influence in calling for “pressure testing.”[13] Results will be demanded, excuses will be made, penalties will be extracted, to guarantee public accountability, especially amidst sometimes equally cynical public skepticism about the vagueness of standards, greenwashing, and “virtue signaling.” Then again, we should not forget that there exist winning corner strategies. Watchdogs not only protect businesses themselves but also help coordinate their activities. Without them, there can be no game.

Here, importantly, pro-ESG businesses and investors tend to welcome regulators—and agree that ESG calls for an integrated approach to legal, risk and compliance at a minimum. This should not be an excuse, however, for turning ESG (counterproductively) into an “administratively driven” initiative.[14] As interests become more aligned in this space, there will be less of a need for “redundant bureaucratic arrangements” as a hedge against political uncertainty.[15]

For good faith businesses, ideology should come last. Ideology is not about looking at results; ideology is what happens to cynicism when it ceases to pretend to be about results. Ideology is where good business debates go to die, and it thrives in political uncertainty. Ideology is not just the province of loudmouth populists (though the “swamps” are its usual milieux); it can also infect corporate boards too. But this is not to say that businesses must yield to the ideological debate. They must seize this new opportunity to show that, when it comes to ESG, winning is not really about the other side losing,[16] that the economy is not in fact a mean zero-sum game.


[1] Press Release, PwC, ESG-Focused Institutional Investment Seen Soaring 84% to US$33.9 Trillion in 2026, Making Up 21.5% of Assets under Management: PwC Report (Oct. 10, 2022), https://www.pwc.com/gx/en/news-room/press-releases/2022/awm-revolution-2022-report.html.


[2] Stephen Neukam, Republican States Move to Block Giant Asset Manager’s ESG Push for Utility Companies, THE HILL, May 10, 2023, https://thehill.com/policy/energy-environment/3998234-republican-states-move-to-block-giant-asset-managers-esg-push-for-utility-companies.


[3] Robert G. Eccles, The Topology of Hate for ESG, FORBES, Jun. 3, 2022, https://www.forbes.com/sites/bobeccles/2022/06/03/the-topology-of-hate-for-esg/?sh=61c68e91b0a9.


[4] “ESG – The Signal and the Noise” was the title of a panel held by the Berkeley Forum for Corporate Governance on November 11, 2021, which was notably attended by Melinda Haag, former U.S. Attorney for the Northern District of California, now a partner at Paul, Weiss. Berkeley Forum for Corporate Governance, ESG – The Signal and the Noise, YouTube (Nov. 11, 2021), https://www.youtube.com/watch?v=R1LCWOB_6BM.

[5] How to Play Tic Tac Toe, WikiHow, https://www.wikihow.com/Play-Tic-Tac-Toe (last accessed June 15, 2023).


[6] This helps explain where the opportunities are. For example, as Kelly Shue reports, surveys of ESG funds show that they tend to care more about the “E.” Steven J. Dubner, Are E.S.G. Investors Actually Helping the Environment?, FREAKONOMICS RADIO (June 14, 2023), https://freakonomics.com/podcast/are-e-s-g-investors-actually-helping-the-environment/.


[7] For example, the investment company Vanguard “has long taken a more circumspect view of the claims made by ESG marketers and the ability of asset managers to deliver market outperformance alongside planetary progress.” Kenneth P. Pucker, Vanguard Confronts an Inconvenient Truth, HARV. BUS. REV., Apr. 24, 2023, https://hbr.org/2023/04/vanguard-confronts-an-inconvenient-truth (“Vanguard’s business model differs from most of its peers in three critical respects: It is owned by its investors; it is primarily committed to passive, index-based, low-fee funds; and it is focused on over 30 million retail (rather than institutional) investors. As a result, the company is cautious about new product development and frank in assessing investment trends”).


[8] PwC US, PwC’s US ESG Leader shares insights on the current state of ESG, YouTube (Sep. 8, 2021), https://www.youtube.com/watch?v=r4eUHXr5US8&t=5s.


[9] NYU Law School, Environmental, Social, and Governance Issues in Investing: An Academic Perspective, YouTube (Sep. 27, 2018), https://www.youtube.com/watch?v=dHemlq_QOzE&t=4110s.


[10] Eccles finds a six-to-seven-year lag before results can show. Id.


[11] Melinda Haag, former U.S. Attorney for the Northern District of California, now a partner at Paul, Weiss, describes as “cynical” the typical perspective of watchdogs such as the Securities Exchange Commission on ESG claims by companies and investors. Berkeley Forum for Corporate Governance, supra note 4.


[12] Id.


[13] Id.


[14] PwC US,  supra note 8.


[15] Michael M. Ting, A Strategic Theory of Bureaucratic Redundancy, 47 AM. J. POL. & SCI. 274, 275 (2003).

[16] Research by Kelly Shue, for example, highlights how the ideological extremes are “missing the point,” and why ESG outcomes are more likely to improve by, e.g., “engaging” with (instead of punishing) firms that score poorly on (often superficial) ESG ratings. Dubner, supra note 6.