Responsible Investing & the Free Market: a False Dichotomy (Communities - News & Events)

Item ID 2963552 in Category: Communities - News & Events

Responsible Investing & the Free Market: a False Dichotomy


In the world of finance and economics, there is an ongoing whether responsible investing and the fiduciary duty asset managers hold to generate risk-adjusted returns can coexist. Responsible investing often manifests as due diligence into the Environmental, Social and Governance (ESG) factors of companies, which critics argue does not support making sound investment decisions. Proponents, however, view such analyses as a mechanism to ensure better long-term returns for individual companies, but, more importantly, greater long-term returns from a total market perspective. To truly understand the intersection of these two forces, we must examine them through the lens of ‘externalities’. These are indirect costs or benefits incurred by third parties, which are often not accounted for in the price of a product or an asset. Pricing in such externalities can alter the incentive structures for businesses and lead to a more equitable and efficient system. The classic example of an externality is a manufacturing company that pollutes a lake its factory is located by. In doing so, it not only hurts the health of the citizens (and creates an economic cost through their healthcare needs and decreased productivity), but also economic costs to local enterprises such as fishing or tourism.

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Target State: New York
Target City : New York City
Last Update : May 27, 2025 1:33 AM
Number of Views: 18
Item  Owner  : focusoutlook
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Contact Phone: + 1 (315) 6664984

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2025-05-30 (0.382 sec)