[The Economist] The Warm Glow

July 21, 2022

The Economist recently published a report coauthored by Andrew King, Questrom Professor of Management and Professor Strategy & Innovation, examining the effects of ESG investments on corporations and their sustainability.

It is not always a win-win situation when it comes to ESG investments. There are often tradeoffs involved in the process, which leads to questions about their value. Believed to assist companies in identifying material risks and pursuing growth opportunities, ESG investing has grown in popularity. The article highlights the data showcasing ESG measurements and different pay offs over time, emphasizing the importance of materiality. As Andrew points out, ESG investing is not always the best method to account for sustainability.

“Efficient-markets theory suggests that excess returns are always hard to find, especially when information is widely available.”

Andrew King
Questrom Professor of Management, Strategy & Innovation

Others have disputed the idea that virtue can ever be free. As virtuous investors sell out of “sinful” companies, they push share prices down, which offers buyers the prospect of higher returns- even though raising polluting companies’ capital costs should make it harder for them to make money.