Companies today are facing unprecedented pressure to make progress on environmental, social, and governance (ESG) issues. The demand for companies to address these issues is not new, but a relatively recent development is that this demand now comes from investors, rather than activists or other stakeholders. The pressure from investors has caused many companies to… Read More »
Traditional financial regulation would take the form of legislation passed by Congress and then interpreted by agencies. We are not in that world anymore. Given Congressional paralysis, de-facto financial regulation is being pushed by the setting of agency agendas and being communicated to the business community through announcements of priorities and prosecutions. For example, despite… Read More »
“The major problem that I have is that even if they’re [ESG funds] marketed correctly, they actually have no demonstrable impact.”1 Tariq Fancy, the former head of BlackRock’s sustainable investing Flows into ESG mutual funds have increased markedly over recent years, raising the question of whether these capital flows lead to improved ESG policies in… Read More »
As the world returns to something more recognizably normal, it seems natural to ask what the economy will look like after the pandemic. Will things ever go back to how they were, or are we facing a new – and altogether different – reality? Whenever a crisis – political, economic, or social – impacts… Read More »
In response to increasing pressures from activists, regulators, and governments, firms are accelerating the divestment of polluting assets. While this trend reflects mounting concerns about climate change, a natural question is how effective these divestments are in reducing pollution. On the one hand, Environmental, Social, and Governance (ESG) supporters can point to successful pressures that… Read More »
Despite likely being the most successful investment product since the 2008 global financial crisis, exchange traded funds (ETFs) have a serious comparability problem. The problem is particularly acute in environmental, social, and governance (ESG) themed funds, which have benefited from a recent surge in investor interest. A post-crisis explosion in ETF product offerings, combined with extensive issuer discretion in the composition, replication and tracking… Read More »
There is a burgeoning awareness of corporate social performance in the current business climate. Yet, there remains much confusion over the value proposition of corporate nonfinancial investments in the environmental, social, and governance (ESG) areas. To date, the bulk of research attempts to link firm-level ESG ratings provided by third-party rating agencies to a wide… Read More »
Sustainable investing (or impact investing) is arguably the hottest topic in global finance. Morningstar reports that ESG-oriented mutual funds’ net capital inflows quadrupled in 2019 to $20 billion, and signatories to the Principles for Responsible Investments (PRI) had $86 trillion assets under management (AuM) in the same year. However, the economics of sustainable investing are contentious… Read More »
Since 2004, when the term “ESG” was first used in a report published by the United Nations Global Compact, there has been an explosion of interest in the concept, including in corporate boardrooms. The Global Compact, in a follow-up report the next year, described the emergence of ESG corporate policies as a “powerful and historic convergence … between the objectives… Read More »
Institutional ownership has increased tremendously over the past few decades. This shift in ownership has led to major concerns as to whether institutional investors have the incentives or the tools to be active shareholders. Assessing how effective institutional investors are in their stewardship activities has therefore become critical. However, such an assessment has proven difficult,… Read More »