Mr. Fridson does great justice to Lev and Gu's book, and his review inspired me to purchase a copy. While I agree with Mr. Fridson's assessment of the book's fine content and sound conclusions, I also believe the authors missed an opportunity to explore environmental, social and governance (ESG) issues.

E and S issues in particular form important financial and non-financial links between corporate profits and our surrounding environment and society. First, there is a growing demand for material information on ESG issues. In their introductory remarks Lev and Gu dismiss these issues as too broad and not predicated on the sound research results that come from surveys or from data-mined analyst call manuscripts, but the Sustainable Accounting Standards Board was formed more than five years earlier (shareholder oriented SASB isn't even mentioned in their book), and the stakeholder oriented Global Reporting Initiative (GRI) was founded in 1997.

The advent of both GRI and SASB belie Lev and Gu's too easy dismissal of ESG issues, and while it doesn't detract from their fine book, it is a missed opportunity. In addition to the granular issue of how to identify, define and codify material ESG issues (the core of both GRI and SASB, though of course through their respective stakeholder and shareholder lenses), there is a philosophical question that goes beyond calculating financial returns to determining the cost of externalities such as excess carbon emissions, lost biodiversity, and poor social conditions. Some of the same data that informs the valuation of corporations is also used by regulators, policy makers, and law setters.

It would have been nice if Lev and Gu had provided more detail on ESG issues, and expanded their scope to allow consideration of the corporation's role in society. As it is, their assumption is that it is solely a vehicle to greater growth and profit. "Even major environmental disasters, like the Exxon Valdez spill (March 1989), were, in retrospect, just a hiccup in the relentless growth path of the company." There are many who would find fault with their observation about Exxon, not because it isn't true, but because it is. Updated accounting rules offer the promise of more than just more accurate valuations; they also offer potential for greater accountability for externalities and other costs offloaded to society and the planet.