Epistemic gerrymandering: ESG, impact investing, and the financial governance of sustainability

Finance plays an increasing role in the global governance of sustainability. To explain the rise of finance, scholarship is increasingly turning to the financial sector as a producer of policy-relevant knowledge. However, scholarship has paid little attention to how differences within the financial sector affect such knowledge production. This article differentiates two important ways how the financial sector addresses sustainability: investments following environmental, social and governance (ESG) standards, and impact investing. Whereas diversified ESG investing is centered around index and data providers, impact investors manage non-listed assets and develop idiosyncratic ‘impact’ approaches. I introduce the term ‘epistemic gerrymandering’ to describe how impact investors tailor ‘impact’ to their financial portfolios and to explain how the resulting heterogeneity and ambiguity is stabilized. Tracing the historical development of impact investing from three distinct strands into a transnational club, I argue that the club structure, together with impact investors’ proximity to private wealth management, explains the persistence of epistemic gerrymandering. As a knowledge regime, epistemic gerrymandering reinforces three dynamics of particular importance to political economists: the subjugation of sustainability to financial returns, the restriction of access to epistemic arenas to wealthy elites, and the rechanneling of charitable and public resources to de-risk private investments.