ESG Investing and Asset Returns
Environmental, social and governance investing—ESG investing for short—is the latest movement by activists to compel businesses and persuade investors to pursue larger social goals, including environmental initiatives, by mandating more extensive disclosure of environmental, social and governance practices of public companies.
But a new essay series by the Fraser Institute—ESG: Myths and Realities—highlights the misunderstandings and simplifications of this call for increased financial disclosure regulations.
The third essay, ESG Investing and Asset Returns, finds that, according to a broad review of existing research, there's no conclusive evidence that investing in companies with higher ESG rankings produces higher returns for investors. Therefore, there’s also no conclusive evidence to suggest that a more expansive ESG reporting regime, mandated by government in Ottawa or elsewhere, will produce benefits to investors or society more broadly.
Future essays in the series will explore core questions and misunderstandings related to the ESG movement including how it undermines the fiduciary responsibilities of corporate directors; whether investors actually earn higher returns from ESG investing; and how market economies already achieve many of the things to which ESG advocates aspire, among other topics.
