Scottish business leaders have questioned whether organisations could be in danger of falling out of love with Environmental, Social and Governance (ESG) after a study of 235 stocks found the metrics not only make a portfolio less profitable but are less likely to achieve their stated aims.

Research by the media group Fortune has suggested ESG does not result in the most efficient portfolio in terms of risk-adjusted returns. 

Responding to the findings, Lord Willie Haughey told listeners to his Go Radio Business Show: “Environmental, Social and Governance have obviously been the buzzwords for the past five years but the recent reports suggest companies who have rushed in to invest in organisations that meet ESG criteria have showed a severe drop in the value of their funds.

“Could this mean a passion for this level of ethics in business is cooling off?”

Sir Tom Hunter acknowledged there were investors who did not want to fund ventures such as hydrocarbon companies, but at the same time openly admitted, if you opted out, you would have missed out on a cash bonanza.

“You and I talk about this transition to net zero by 2050,” he told his co-host Lord Haughey, “but we’re not turning off the spigot in the North Sea overnight and there has actually been some big energy companies coming together to offer solutions. 

“So I think there is an important theme at play here. I don’t think it’s a question of simply investing in companies who are doing the right thing and then expecting that you’ll make a higher return. 

“I believe it is a long-term investment decision, essentially, and I think that over the long term companies who take care of their people – and who take care of the planet – will ultimately take care of their profits too. 

“However, it is important to recognise this is a long-term commitment.”