AgPa #76: ESG Myth Debunking
Applying Economics – Not Gut Feel – to ESG (2023)
Alex Edmans
Financial Analysts Journal 79(4), URL/SSRN
I like myth debunking and this week’s AGNOSTIC Paper is one from this category. Alex Edmans, one of the leading scholars in the field, takes on a few widespread ESG beliefs. He shows that economics already offers a lot of tools to deal with the issues. To me, this paper was therefore kind of a relief as it shows that ESG doesn’t have to be as complicated as many people make it.
- #1: Shareholder value is a very long-term concept
- #2: Shareholders care about more than just money
- #3: Sustainability risks affect cash flows more than discount rates
- #4: Sustainable stocks not necessarily outperform
- #5: Climate risk is an unpriced externality, not investment risk
- #6: Companies‘ ESG metrics not necessarily capture their impact on society
- #7: More ESG is not necessarily better than less
- #8: More investor engagement is not necessarily better than less
- #9: Paying for ESG performance does not necessarily improve ESG performance
- #10: Not all market failures justify regulation
