Lawrence Person's BattleSwarm Blog 7/12/2021
Once upon a time, lefty sorts could put their money where their mouth was by “
socially responsible investing.”
Individuals and institutions were allowed to choose to align their investments with their values. They could sleep at night knowing that their capital was not supporting causes with which they disagreed, morally or politically. The only cost associated with this socially conscious undertaking was a hit to investment returns, which was inevitable but was accepted voluntarily as the price of peace of mind.
But these days, that’s simply not enough for the Big Sisters of Social Justice Warriorhood. Why make something voluntary when they can force it down your throat? Hence the push for Environmental Social Governance (ESG), a backdoor way to impose far-left values on corporations without having to deal with shareholders at all.
• Environmental, social and governance (ESG) is the biggest trend in finance and business. Index funds focused on sustainability oversee $250 billion of assets. Corporate leaders signaled their alignment with ESG when more than 180 CEOs signed the Business Roundtable statement on business purpose.
• In contrast to the older ethical investment movement, which accepted that morally constrained investment strategies incur costs, ESG proponents claim that investors following ESG precepts earn higher risk-adjusted returns because companies with high ESG scores are lower-risk. Thus, their stock price will outperform, whereas those firms with low ESG scores are higher-risk, leading them to underperform.
• This supposition conflicts with finance theory. Once lower risk is incorporated into a higher stock price, the stock will be more highly valued, but investors will have to be satisfied with lower expected returns. Unsurprisingly, claims of ESG outperformance are contradicted by studies.
More:
https://www.battleswarmblog.com/?p=48652
