The investment world is evolving, and a new frontier is emerging — one that
moves beyond environmental, social and governance (ESG) metrics to embrace
purpose as the new “G” in ESG, and a core driver of long-term value. While
ESG has helped bring critical issues to the surface, it has become clear that
it’s not enough. Purpose is now stepping in to fill the gap — signaling a
profound shift in how capital is allocated and how businesses are expected to
operate.
At the forefront of this shift is the Canadian Purpose Economy
Project — a national initiative accelerating the
adoption of social purpose in business and finance. It is helping reimagine the
role of capital in society, mobilizing leaders and shaping new standards that
embed purpose at the heart of economic decision-making.
During a recent “Purpose Lens: Transforming Investment Practices in
Canada”
fireside chat — moderated by Millani CEO Milla
Craig, a trusted voice in
ESG investing, and hosted by Impact United
Academy’s Richard
Muller — one
insight rang clear: Investors and companies are navigating an inflection point.
ESG frameworks, though valuable, tend to be reactive — overly focused on risk
mitigation and often disconnected from a company’s core strategy. Social
purpose, by contrast, is proactive: It articulates the reason a company exists
— beyond profit and aligns operations, products, services and governance — with
a broader societal ambition.
Why purpose now?
A growing number of investors are recognizing that purpose-led companies may
outperform over the long
term.
An integrated social purpose has been
shown
to foster innovation, attract and retain talent, build trust with stakeholders,
and anticipate societal expectations. This is not about philanthropy or
marketing — it’s about business strategy.
Traditional investment approaches often miss this dimension. ESG has become a
compliance exercise for many firms, reduced to box-ticking and reporting. But
today’s investors increasingly want to know:
These are the questions that purpose answers.
Reframing risk and value
Purpose also shifts how we understand risk. A company that ignores its social
and environmental impacts may face regulatory, reputational and operational
risks. But more fundamentally, if a business lacks a compelling societal
purpose, it risks becoming irrelevant.
This forward-looking view is changing what counts as material. Investors are
beginning to see purpose as a leading indicator of performance and
resilience.
A company grounded in purpose is more likely to successfully navigate
disruption,
pivot toward opportunity and retain stakeholder confidence when the landscape
shifts.
Fiduciary duty reimagined
Purpose isn’t only relevant to companies — investors themselves have a role to
play. Fiduciary duty is evolving from narrow interpretations focused on
short-term financial returns to broader conceptions that encompass long-term, shared
value creation; intergenerational equity and systems-level thinking.
In this view, investing in purpose-led companies is not optional — it is central
to fulfilling fiduciary responsibility in a complex, interconnected world. Asset
owners and managers are being called to steward capital in ways that shape a
better future.
What investors can do now
The shift to purpose investing is still in its early stages. But
forward-thinking investors are already:
-
Asking new
questions:
Moving beyond ESG scores to explore whether a company has a clearly defined
and embedded social purpose.
-
Supporting
disclosure:
Advocating for purpose transparency and integrated reporting that connects
purpose to strategy, governance and performance.
-
Engaging
boards:
Urging directors to govern for purpose, not just profit, and to link
executive
pay
and oversight to purpose-driven outcomes.
-
Allocating
capital:
Prioritizing investments in companies that are purpose-led and purpose-fit
for a changing world.
Looking ahead
A purpose
economy
is emerging — one where companies are engines of societal
progress
and investors are partners in building a better future. But leading in this
space will require courage, clarity and commitment from all parts of the
investment system.
Purpose is not a trend — it is a strategic imperative. For investors seeking to
manage risk, capture opportunity and create lasting value, purpose is the next
frontier.
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Coro Strandberg is President of Strandberg Consulting, which provides strategy advice to companies and industry associations that seek to integrate social and environmental considerations into their purpose, governance, operations and supply chains to create business value and societal benefit.
Published May 30, 2025 8am EDT / 5am PDT / 1pm BST / 2pm CEST