Environmental, Social, and Governance criteria are now considered significant, global non-financial evaluating factors of corporate value. However, no attention is given to what influences the integration of ESG information by individual investors in their investment decisions. This study first identifies different types of information investors use to make investment decisions. Risks identified in information integration in investment decision making is reviewed. Next, the Unified Theory of Acceptance and Use of Technology model is used to identify individual investors’ investment tendencies (...) and the factors affecting integration of ESG information into investment decisions. Each of four categories for UTAUT innovation adoption factors are discussed in relation to how they affect individual investors’ integration of ESG information. Standardization of ESG reporting and evaluation frameworks would reduce efforts to adopt ESG information and could build a strong foundation for facilitating ESG information integration. Corporates’ efforts to further communicate their ESG management through their investor relations and active governmental well as non-governmental organizations’ participation are recommended. (shrink)

Artificial intelligence (AI) governance and auditing promise to bridge the gap between AI ethics principles and the responsible use of AI systems, but they require assessment mechanisms and metrics. Effective AI governance is not only about legal compliance; organizations can strive to go beyond legal requirements by proactively considering the risks inherent in their AI systems. In the past decade, investors have become increasingly active in advancing corporate social responsibility and sustainability practices. Including nonfinancial information related to environmental, social, and (...) governance (ESG) issues in investment analyses has become mainstream practice among investors. However, the AI auditing literature is mostly silent on the role of investors. The current study addresses two research questions: (1) how companies’ responsible use of AI is included in ESG investment analyses and (2) what connections can be found between principles of responsible AI and ESG ranking criteria. We conducted a series of expert interviews and analyzed the data using thematic analysis. Awareness of AI issues, measuring AI impacts, and governing AI processes emerged as the three main themes in the analysis. The findings indicate that AI is still a relatively unknown topic for investors, and taking the responsible use of AI into account in ESG analyses is not an established practice. However, AI is recognized as a potentially material issue for various industries and companies, indicating that its incorporation into ESG evaluations may be justified. There is a need for standardized metrics for AI responsibility, while critical bottlenecks and asymmetrical knowledge relations must be tackled. (shrink)

Responsible investing (RI) is a growing phenomenon in the international investment arena. This article investigates the level of knowledge of members of South African pension/provident funds with regard to RI and the importance with which they view various ethical, environmental, social and governance (ESG) criteria. Respondents ( n = 281) indicated a relatively low level of understanding of the concept of RI. Significant differences were noted in the perceptions of respondents about the relative importance of ethical and ESG (...) class='Hi'>criteria based on their gender and level of education. The findings could assist asset owners in reformulating their investment mandates, which in turn, will enable fund managers to invest in a more responsible manner. (shrink)

BackgroundTo prevent the planet from catastrophic global warming a reduction of greenhouse gas emissions to net zero is required. Thus, divestment from fossil fuels must be a strategic interest for health insurers. The aim of this study was to analyse the implementation of environmental, social and governance criteria in German private health insurers’ investments.MethodsIn 2019 a survey about ESG strategies was sent to German private health insurance companies. The survey evaluated investment strategies and thresholds for the exclusion of sectors (...) and business practices, as well as company strategies for sustainable business development.FindingsGiven their business reports, German private health insurers manage assets of more than €350 billion. 11 of 40 insurance companies provided quantitative data, 10 refused to answer. According to quantitative data, €66 billion of assets is managed according to any ESG criteria; this equals an average of 76% of each company’s bonds. None of these insurers excluded the production and sale of fossil fuels. All excluded coal mining but only at high thresholds. For €226 billion, no data were provided.InterpretationThe findings are in contrast to the expected intrinsic economic interest of the insurers to stop global warming and improve public health. The majority of assets are managed in a highly problematic manner, especially the absence of capital allocated in fields contrary to medical ethics cannot be presumed. Lack of transparency is a major problem that limits clients in choosing the insurer who has the most advanced ESG criteria. (shrink)

While a growing number of firms are being evaluated on environment, social and governance criteria by sustainability rating agencies, comparatively little is known about companies’ responses. Drawing on semi-structured interviews with companies operating in Italy, the present paper seeks to narrow this gap in current understanding by examining how firms react to ESG ratings, and the factors influencing their response. Unique to the literature, we show that firms may react very differently to being rated, with our analysis yielding a (...) fourfold typology of corporate responses. The typology captures conformity and resistance to ratings across two dimensions of firm behaviour. We furthermore show that corporate responses depend on managers’ beliefs regarding the material benefits of adjusting to and scoring well on ESG ratings and their alignment with corporate strategy. In doing so, we challenge the idea that organisational ratings homogenise organisations and draw attention to the agency underlying corporate responses. Our findings also contribute to debates about the impact of ESG ratings, calling into question claims about their positive influence on companies’ sustainability performance. We conclude by discussing the wider empirical, theoretical and ethical implications of our paper. (shrink)

Joining voluntary thematic initiatives can be a means for firms to legitimate their business activities. However, a lack of review mechanisms could create incentives for free-riding. This might lead to a lower commitment to the initiative’s principles, and endanger its credibility and its members’ legitimacy benefits. Whether members of voluntary initiatives take advantage of the opportunity to free-ride has not been analyzed empirically so far. To fill this research gap, we investigate from an institutional theory perspective the actual implementation behavior (...) of publicly listed signatories of the United Nations Principles for Responsible Investment (UN PRI) in a difference-in-differences and an event study setting. Our empirical results show that, after signing, UN PRI signatories integrate environmental, social, and governance (ESG) criteria in their business activities significantly more than matched non-signatories from the financial sector, indicating the commitment of the signatories to the UN PRI in general. However, while the initial members show a high commitment to the initiative’s principles by increasing their ESG integration performance substantially, new members signing at a later stage of the initiative perform considerably less, and thus undermine the UN PRI’s credibility. We derive implications for voluntary thematic initiatives to avoid such a development. (shrink)

En 2015, la ONU aprobó 17 Objetivos de Desarrollo Sostenible (ODS) integrados en la Agenda 2030. Siguiendo esta línea, y dada su relevancia, las universidades europeas están integrando el desarrollo sostenible en sus planes de estudio. El objetivo de esta propuesta consistirá en desarrollar una experiencia piloto donde nuestros estudiantes a través del aprendizaje cooperativo formen equipos de trabajo agrupados según el test Riso-Hudson (1999) garantice el máximo rendimiento. Como resultado se ofrecerá una medida de la rentabilidad que aporta la (...) incorporación de la sostenibilidad en los proyectos de inversión empresariales a la par que la creación de valor sostenible. (shrink)

This article explores the role of financial markets for sustainable development. More specifically, the authors ask to what extent financial markets foster and facilitate more sustainable business practices. The authors highlight that their current role is rather modest and conclude that, on the old paths, a paradoxical situation exists. On one hand, financial market participants increasingly integrate environmental, social, and governance criteria into their investment decisions, whereas on the other hand, in terms of organizational reality, there seems to be (...) no real shift toward more sustainable business practices. The authors identify two main challenges within the field of sustainable investments that are relevant for entering new avenues that may help overcome this situation. First, a reorientation toward a long-term paradigm for sustainable investments is important. Second, ESG data must become more trustworthy. From a theoretical point of view, the authors finally highlight the potential market consequences when ESG investment criteria are used. (shrink)

Does AI conform to humans, or will we conform to AI? An ethical evaluation of AI-intensive companies will allow investors to knowledgeably participate in the decision. The evaluation is built from nine performance indicators that can be analyzed and scored to reflect a technology’s human-centering. When summed, the scores convert into objective investment guidance. The strategy of incorporating ethics into financial decisions will be recognizable to participants in environmental, social, and governance investing, however, this paper argues that conventional ESG frameworks (...) are inadequate for AI-intensive companies. To fully account for contemporary technology, the following categories of evaluation will be developed and featured as vital investing criteria: autonomy, dignity, privacy, performance. With these priorities established, the larger goal is a model for humanitarian investing in AI-intensive companies that is intellectually robust, manageable for analysts, useful for portfolio managers, and credible for investors. (shrink)

This article examines the risk and return profiles of stock indices composed of companies meeting environmental, social and governance screening criteria [such as the Dow Jones Sustainability Indices ] and conventional composite indices of eight Asian countries from 2002 to 2014. The results indicate that there are no significant differences in the returns or risk-adjusted returns between the ESG indices and the composite indices within countries. The results do reveal that the market volatility of the ESG indices is higher (...) than the market volatility of the conventional indices. Market betas of DJSI and ESG equity indices are significantly lower than betas of the composite equity indices. The overall results indicate that the performance of ESG equity indices of many Asian countries is similar to the performance of conventional indices, suggesting that investors can pursue socially responsible investing objectives without a material difference in portfolio performance from conventional investing. (shrink)

We draw from resource dependence and institutional theories to explore how board characteristics associated with directors’ capacities to provide resources and legitimacy (i.e., board size, the number of non-executive, interlocking, and female directors) along with regulative, normative, and cultural-cognitive institutional conditions combine to shape firm environmental, social, and governance (ESG) performance. Using a process of configurational theorizing with fuzzy set qualitative comparative analysis and data from firms in 32 countries, we identify multiple equifinal configurations that are associated with high and (...) low ESG performance. We find that high and low ESG performance have different drivers due to complementarities among the presence and absence of board characteristics. Our results also show that the effectiveness (or not) of the bundles of boards’ characteristics for ESG performance varies across institutional contexts. By leveraging these findings to construct a typology of board archetypes that lead to high and low ESG performance, we offer novel theoretical and empirical insights to scholars as well as implications for practice. (shrink)

Addressing ESG issues has become a point of interest for investors, shareholders, and governments as a risk management concern, while for firms it has become an emerging part of competitive strategy. In this study, a database from an independent ratings agency is used to examine, longitudinally, how Australian Securities Exchange (ASX) 300 firms are responding to ESG issues. Following institutional theory predictions, ASX300 firms are improving ESG performance over the 2002–2009 timeframe. Furthermore, over this timeframe, performance on the governance dimension (...) improved at a greater rate than environmental or social performance, as predicted. Lastly, high impact industries are predicted to demonstrate overall improved ESG performance relative to medium or low impact industries over the timeframe, but this hypothesis was not confirmed. Results are discussed along with implications and future research directions. (shrink)

This research examines how firms' environmental, social and governance (ESG) performance impacts their capacity utilisation using data from listed firms in China from 2009 to 2022. We find that firms' ESG performance significantly elevates their capacity utilisation with an inverted U-shaped relationship. All three dimensions of ESG—environmental performance, social responsibility and governance—positively affect capacity utilisation, addressing gaps in enhancing firms' capacity utilisation through ESG practices. We identify an indirect transmission channel through which firms' ESG practices influence capacity utilisation, marking a (...) pioneering discovery in our study. Using structural equation modelling (SEM), we confirm that firms' ESG practices enhance capacity utilisation by improving competitiveness and customer stickiness. Additionally, we discuss potential heterogeneity in the impact of ESG performance on capacity utilisation, considering factors such as ownership structure, industry, financial constraints and equity arrangements. Our findings provide insights for governments and companies aiming to incorporate ESG principles into their decision-making processes to enhance capacity utilisation. (shrink)

Despite the detrimental consequences of corporate social irresponsibility (CSiR), the role of monitoring and incentive-based corporate governance (CG) mechanisms in mitigating stakeholder mismanagement has been largely neglected in the literature. At the same time, there has been growing interest in holding executives accountable for environmental, social, and governance (ESG) performance by linking their compensation to related targets. However, prior research provides scant and inconclusive evidence on the effectiveness of ESG pay in curbing CSiR. This study addresses these shortcomings and contributes (...) to the emerging CSiR/CG literature by harnessing an institution-based view on executive compensation. Specifically, it recognizes national culture as the “missing determinant” in comparative CG studies and investigates the culturally-driven boundary conditions for the relationship between ESG pay and CSiR. The hypotheses were tested on a data set of 4066 firms from 56 countries during 2010–2020. The analysis supports a negative, though modest, effect of ESG pay on CSiR. Furthermore, the study shows that this relationship varies in statistical and economic significance across cultural contexts. Particularly, incentives prove effective for firms headquartered in nations characterized by low power distance, individualism, low uncertainty avoidance, and masculinity. Conversely, in other settings, compensation linked to ESG may either lack motivational impact or even yield counterproductive outcomes. These findings have implications for both the CSiR and CG literature, as well as for practice. (shrink)

We investigate how conventional asset managers account for environmental, social, and governance factors in their investment process. We do so on the basis of an international survey among fund managers. We find that many conventional managers integrate responsible investing in their investment process. Furthermore, we find that ESG information in particular is being used for red flagging and to manage risk. We find that many conventional fund managers have already adopted features of responsible investing in the investment process. Furthermore, we (...) argue and show that ESG investing is highly similar to fundamental investing. We also reveal that there is a substantial difference in the ways in which U.S. and European asset managers view ESG. (shrink)

This study examines the volatility risk for firms that are rated high on environmental, social, and governance (ESG) dimensions in emerging markets and developed markets outside the United States and Canada. Employing the Morgan Stanley Capital International (MSCI) ESG Leader indices, this study investigates the impact of good news and bad news on the volatility risk for the highest ESG-rated firms through multivariate DCC-EGARCH modeling. This study finds that the impact of a negative news shock of size 2 standard deviations (...) is approximately 45% higher than that of a positive news shock of the same size for the case of the developed markets under interest. With respect to emerging markets, this study reports that the impact of a negative news shock of size 2 standard deviations is 41% higher than that of a positive news shock of the same size. The results provide empirical evidence in support of the hypothesis that the volatility impact of news for high ESG-rated firms in developed markets and emerging markets is larger for bad news compared to good news, and the results are robust across time. The empirical findings underline the importance of reporting-related disclosures of ESG initiatives, and provide seminal evidence of a slow response to news by high ESG-rated firms in emerging markets. (shrink)

Although legitimacy theory provides strong arguments that environmental, social and governance disclosure and performance can help mitigate firm-specific risks, this relationship has been repeatedly challenged by conceptual arguments, such as ‘transparency fallacy’ or ‘impression management’, and mixed empirical evidence. Therefore, we investigate this relationship in the revelatory case of initial public offerings, which represent the first sale of common stock to the wider public. IPOs are characterised by strong information asymmetry between firm insiders and society, while at the same time (...) suffering from uncertainty in firm legitimacy, culminating in amplified financial risks for both issuers and investors in aftermarket trading. Using data from the United States, we demonstrate that voluntary ESG disclosure reduces idiosyncratic volatility and downside tail risk and higher ESG ratings have lower associated firm-specific volatility and downside tail risk during the first year of trading in the aftermarket. We provide theoretical arguments for the relationships observed, suggesting that companies striving for ESG performance and communicating their efforts signal their compliance with sustainability-related norms, thus acquiring and upholding a societal license to operate. ESG performance and disclosure help companies build their reputation capital with investors after going public. We also report that ESG disclosure is a more consistent proxy for ex-ante uncertainty as an indicator of aftermarket risk, thereby replacing some of the more conventional measures, such as firm age, offered in the existing literature. (shrink)

Heterogeneous institutional investors' shareholding preferences have been driven to change by the deepening of ESG investment philosophy. Therefore, we examine the impact of corporate ESG performance on institutional investors' shareholding preferences and its mechanism of action. We conduct mixed OLS and mediation effect tests using data on ESG responsibility scores and institutional investors' shareholding ratios of A-share listed companies in China from 2010 to 2020 as samples. We find that corporate ESG performance can significantly and robustly increase institutional investors' shareholdings; (...) the mediation effect analysis shows that overall corporate ESG performance contributes to increases in corporate book and market values, thus encouraging institutional investors to increase their shareholdings. The heterogeneity analysis shows that independent institutional investors attach more importance to corporate ESG responsibility performance, and long-term institutional investors attach more importance to corporate environmental performance; moreover, institutional investors have more significant ESG shareholding preferences for Chinese SOEs. Our study can strengthen the encouragement of institutional investors to integrate ESG investment concepts from multiple perspectives, such as research and analysis, portfolio management, risk control, and due diligence management, to design and develop targeted ESG investment tools, give full play to the role of shareholders and guide the sound development of listed companies from the perspective of investment strategy objectives. (shrink)

An updated excerpt from the larger paper AI Human Impact. Excerpt explains why ESG investing requires Updating for the AI economy.

The study investigates the effects of ESG washing on banks' reputational exposure. We define ESG washing as a disparity between a bank's environmental and social disclosure level and the practical implementation of the relative measures. The analysis involves an international sample of 120 banks operating across 35 countries from 2014 to 2020. The results evidence a different effect based on the pillar considered: the higher the inconsistency on environmental issues, the higher a bank's reputational exposure. Conversely, higher levels of disclosure (...) compared to performance on social issues appear to reduce reputational exposure. In addition, citizen movements and the country's legal system play a significant role in amplifying or mitigating a bank's reputational exposure. Our findings offer insight into the phenomenon of ESG washing in the banking industry, supporting the need for more verified information across countries and all economic sectors. (shrink)

This study seeks to shed light on the effect of star CEOs on the environmental, social, and governance (ESG) performance of Chinese firms. Relying on the theoretical perspective of role identity and role constraints, we analyze data from 1222 Chinese firms listed on the Shanghai and Shenzhen Stock Exchanges from 2006 to 2019. The results analyzed using the ordinary least squares estimate method reveal a positive effect of star CEOs' extreme confidence and legitimacy pressure mechanisms on ESG performance. We also (...) find that this positive relationship is negatively moderated by higher organizational slack but strengthened by a lower level of regional marketization, as the degree of firms' dependence on external stakeholders' resources differs significantly. Additionally, this study finds that ESG activities are less likely to be associated with firm performance if star CEOs pursue them to satisfy their need for star status. These findings supplement the early tests of the influence mechanism of star CEOs on organization-level results and expand the context discussion of role identity and role constraints theory in the Chinese institutional environment. (shrink)

The aim of this paper is to investigate the relationship between environmental, social, and governance controversies and firm market value. We use a unique dataset of more than 4000 firms from 58 countries during 2002–2011. Primary analysis surprisingly shows that ESG controversies are associated with greater firm value. However, when interacted with the corporate social performance score, ESG controversies are found to have no direct effect on firm value while the interaction appears to be highly and significantly positive. Building on (...) this evidence, we attempt to explore the channels through which CSP may enhance market value. Conducting sample split analysis indicates that higher CSP score has an impact on market value only for high-attention firms, those firms which are larger, perform better, located in countries with greater press freedom, more searched on the Internet, more followed by analysts, and have an improved corporate social reputation. Thus, our findings provide new insights on the role of firm visibility through which firms can profit from their CSP. (shrink)

Using a sample of US stocks over the period 1991–2019, we test whether stocks with high exposure to a social index exhibit high returns. Using a univariate analysis, our in‐sample results show that stocks with high sensitivities to the MSCI KLD 400 Social Index underperform stocks with low sensitivities by an annual risk‐adjusted performance of 7.02%. The negative premium is also larger in the post‐crisis period of 2007–2019 and is equal to 10.25%. The out‐of‐sample results offer, however, only weak evidence (...) of such a finding, with a risk‐adjusted performance difference of merely −0.84% over the full sample period and no significant differences between the pre‐crisis and post‐crisis periods. In the multivariate regression, we find evidence of a negative relationship between exposure to the social index and stock performance. Moreover, we find that stocks with high exposure to the social index display a low corporate social responsibility score, a high Tobin’s Q, high long‐term debt, a large size, high total risk, a high market beta, a high SMB coefficient, a low HML coefficient, and a small MOM coefficient. (shrink)

The primary objective of this research is to examine the potential influence of environmental, social, and governance (ESG) disclosure on cash holdings. Additionally, the study explores the role of earnings management (EM) practices as a mediating factor in this relationship. The sample comprises 797 companies listed on financial markets across 19 European countries, and the data spans from 2013 to 2019. The outcomes indicate a significant negative correlation between ESG disclosure and cash holdings, implying that ESG performance can be used (...) by management to resolve disputes with stakeholders. The outcomes further indicate that the existence of EM practices partially mediates the link between ESG disclosure and cash holdings. Moreover, they are robust by substitute cash holdings specification, three distinct initiatives of ESG disclosure (i.e., environment, social, and governance), and a two-stage least squares assessment. Therefore, the findings document that nonfinancial reporting in the form of ESG disclosure can assist in controlling agency conflict, leading to better valuations of company performance by stakeholders. (shrink)

We investigate how conventional asset managers account for environmental, social, and governance factors in their investment process. We do so on the basis of an international survey among fund managers. We find that many conventional managers integrate responsible investing in their investment process. Furthermore, we find that ESG information in particular is being used for red flagging and to manage risk. We find that many conventional fund managers have already adopted features of responsible investing in the investment process. Furthermore, we (...) argue and show that ESG investing is highly similar to fundamental investing. We also reveal that there is a substantial difference in the ways in which U.S. and European asset managers view ESG. (shrink)

Stories about corporate social responsibility have become very frequent over the past decade, and managers can no longer ignore their impact on firm value. In this paper, we investigate the extent and the determinants of the stock market’s reaction following ordinary news related to environmental, social and governance issues—the so-called ESG factors. To that purpose, we use an original database provided by Covalence EthicalQuote. Our empirical analysis is based on about 33,000 ESG news, targeting one hundred listed companies over the (...) period 2002–2010. On average, firms facing negative events experience a drop in their market value of 0.1%, whereas companies gain nothing on average from positive announcements. We find also that market participants are responsive to the media, but they do not react to firms’ press releases or to NGOs’ disclosures. Moreover, our results indicate that sector’s reputation mitigates the loss and that cultural proximity and lexical contents of ESG disclosures play a significant role in the magnitude of the impact. (shrink)

This study provides an in-depth examination of the relationship between environmental, social, and governance (ESG) performance and the idiosyncratic volatility of Korean companies. In line with the risk-mitigation view, the study finds that strong ESG performance is associated with a reduction in a firm's idiosyncratic volatility. The impact of ESG performance on reducing firm volatility was particularly evident during the COVID-19 pandemic, highlighting the role of ESG performance in risk mitigation during crisis periods. The study also shows that companies with (...) strong ESG performance in industries that are highly sensitive to ESG factors are particularly adept at reducing idiosyncratic volatility. These findings underscore the importance of ESG enhancement for both firm managers and policymakers, particularly within ESG-sensitive industries. (shrink)

Drawing on the upper echelon theory, this paper explores the relationship between CEO ability and ESG responsibility fulfillment. Based on this, it further explores the mediating role of organizational resilience and the moderating role of environmental uncertainty. Using data from Chinese A-share-listed manufacturing companies from 2010 to 2020, we find that CEO ability promotes ESG responsibility fulfillment, and organizational resilience mediates this relationship. Furthermore, the promotion effect of CEO ability on ESG responsibility fulfillment through organizational resilience is stronger under high (...) environmental uncertainty. Additionally, the influence of CEO ability on ESG responsibility fulfillment is more pronounced in non-state-owned enterprises and low environmental sensitivity industries. Our study opens the “black box” of the mechanism between CEO ability and ESG responsibility fulfillment and provides practical implications for organizations, managers, and policymakers to promote ESG responsibility fulfillment. (shrink)

ESG-transformation is taking place in all areas of the economy. Banks must become examples and guides in conducting business in an environmentally, socially and governance manner. The purpose of the study is to substantiate the need to determine the correct course and implement the principles of ESG-banking, including in the practice of risk management of commercial banks, taking into account the long-term consequences of today's actions for global economic and natural systems. Scientific novelty lies in the development of incentive measures (...) and support for ESG-banking, taking into account the analysis of world experience. As a result, the validity of the introduction of ESG-banking and ESG-risk management, their impact on increasing stability in the country's economic sector has been proved. The article identifies the limitations that are most relevant for the Russian market due to the novelty of the ESG-concept in the domestic banking sector. (shrink)

ABSTRACT:Utilitarianism is commonly defined in very different ways, sometimes in a single text. There is wide agreement that it mandates maximizing some kind of good, but many formulations also require a pattern of distribution. The most common of these take utilitarianism to characterize right acts as those that achieve “the greatest good for the greatest number.” This paper shows important ambiguities in this formulation and contrasts it (on any plausible interpretation of it) with the kinds of utilitarian views actually defended (...) by major proponents of utilitarianism. The aim is not to defend any of these views but to formulate them in a way that facilitates using them—or, more likely, some revised version suggested by the paper—in guiding decisions in business. The analysis provided here should also facilitate appraisal of utilitarianism, contribute to clarity in discussions of business ethics, and suggest a range of ethical standards that merit consideration for certain kinds of decision. If the results of the analysis are correct, a distributive reading of utilitarianism is at best misleading as a representation of its central thrust; it should not be described as the view that ethics calls for achieving “the greatest good for the greatest number”; and, understood as its major proponents take it, utilitarianism differs more from Kantian ethics than distributive readings imply and is more difficult to defend than it appears to be when viewed as intrinsically distributive. (shrink)

This paper provides an examination of some problems caused by the concentration of influence in the capital markets of developed countries. In particular, I argue that large asset managers exercise quasi-political power that is not democratically legitimate. In section two, I will examine the economic driver behind the size and power of the big asset managers: the passive investing revolution. I will discuss several respects in which this revolution has fundamentally changed capital markets, most notably by making a large share (...) of investors universal owners. In the third section, I argue for my central analytical conjecture: asset managers exercise quasi-political power. They use their influence to shape the rules of the game in public capital markets in order to implement social and environmental policies that have traditionally been the exclusive purview of states. “Asset manager capitalism” is a recent term coined to refer to the contemporary system of corporate governance that succeeded the Berle and Means corporation with its dispersed ownership; the argument of this section is that asset manager capitalism is also a new political-economic regime. In the fourth section I defend my central normative claim: asset manager capitalism is an untenable and illegitimate political-economic arrangement, for at least two reasons. First, the power of asset managers is not checked by any institutional constraints, and is not rendered legitimate by any democratic process. More fundamental than this procedural critique is an argument that the interests of asset managers could not be aligned with the public interest, given the fact that the distribution of capital is highly unequal. I conclude by discussing several proposals to reform asset manager capitalism. (shrink)

Over the past decade, sustainable finance has been a topic of burgeoning significance for investors, and ESG ratings have become commonly used to implement ESG investment strategies in practice. Strikingly, it is widely documented in both academic literature and investment practices that ESG ratings of a given firm can be extremely different across rating providers. However, despite the disagreement in ESG ratings being subject to a lot of criticism, only few studies have examined the sources and determinants of rating divergence. (...) This study examines whether quantitative ESG disclosure is conducive to rating convergence among agencies. Based on ESG rating data of Chinese A-share listed companies, the author finds that greater quantitative ESG disclosure, especially disclosure on environmental and social pillars, results in greater divergence of ESG ratings. When employing a difference-in-differences design with a quasi-experiment of disclosure guidance introduced by Hong Kong Exchange, the results show that if ESG disclosure is standardized and comparable, more numerical information reduces agencies' rating disagreement instead. Further analyses show that the lack of agreement is related to a low rating in the future. The author also finds that the effect of quantified ESG disclosure on rating divergence is more pronounced when firms are single businesses rather than diversified businesses with poor ESG performance rather than good ESG performance. The results are robust to alternative measures of ESG rating divergence, alternative sample, two-way clustering, and additional control variables. Taken together, the results indicate that quantitative ESG disclosure degenerates rating disagreement. (shrink)

Which abstraction principles are acceptable? A variety of criteria have been proposed, in particular irenicity, stability, conservativeness, and unboundedness. This note charts their logical relations. This answers some open questions and corrects some old answers.

Dieser Quick Guide gibt einen Überblick über Compliance, ESG und Investigations in Emerging Markets im Kontext wachsender Anforderungen wie des deutschen Lieferkettensorgfaltspflichtengesetzes und EU-Verordnungen. Deutsche Unternehmen sind durch neue Regelungen, besonders in Emerging Markets, mit verstärkten Sorgfalts-, Dokumentations- und Berichterstattungspflichten konfrontiert. Dieser Leitfaden beleuchtet diese Herausforderungen und zeigt, wie On-Site Audits effizient durchgeführt werden können. Der Inhalt: Einführung Anknüpfungspunkte: Due Diligence, Supply Chain Compliance, Nachhaltigkeitsberichterstattung, Korruptionsvermeidung Betroffene Kreise: Unternehmen, Tochtergesellschaften, Zulieferer, Dritte Organisation von On-Site Audits Zusammenfassung und Ausblick Die Zielgruppen (...) CEOs, CFOs, Rechtsabteilungsleiter, Compliance-Beauftragte, Beschaffungsmitarbeiter, Rechtsanwälte Die Autoren: RA Dr. Constantin Frank-Fahle, LL.M., Gründungspartner (emltc), spezialisiert auf rechtliche und steuerliche Strukturierung von Auslandsinvestitionen. RA Roland Falder, Counsel (emltc), spezialisiert auf Arbeitsrecht und Compliance Untersuchungen. RA'in Dr. Anna-Luisa Lemmerz, Counsel (emltc), spezialisiert auf Handels- und Gesellschaftsrecht sowie Compliance. (shrink)

I propose formulating identity criteria as generic statements of ground, thereby avoiding objections that have been made to the more usual formulations.

The main objective of this study is to understand the value of environmental, social, and governance (ESG) disclosure assurance in the context of the development of sustainable finance standards and laws. This study is based on an analysis of 188 comment letters submitted by such actors in the context of public consultations on the development of three new sustainable finance initiatives (the CFA Institute, the Financial Conduct Authority in the UK, and the New Zealand parliament). The study shows these actors' (...) nuanced and often quite critical perceptions of the effectiveness of external assurance in preventing greenwashing and their reservations about its mandatory nature. These actors have raised various criticisms, including concerns about the vagueness surrounding verification practices; the lack of expertise available to conduct assurance in a new, specialized, and complex field; the costs of the assurance process, particularly for small players; and the lack of control over the reliability of the ESG data used. This article contributes to several emerging trends in the literature—in particular, research on governance practices to prevent greenwashing, on the institutionalization of sustainable finance standards and laws, and on the role of rational myths in the assurance process for ESG disclosures. (shrink)

Volume 20, Issue 3, March 2020, Page 75-77.

The object of this study is the legal framework for the sale or purchase of company shares when the goal of the transaction is the sale of a business. The impact of such transactions on Lithuanian economic development underlines the importance of this study. The recent wave of mergers and acquisitions in Lithuania is likely to substantially increase the number of related legal disputes as well. Legislation on the purchase and sale of company shares and the resulting transfer of business (...) has been enacted in Lithuania only recently. The regulation of such cases remains rather unclear, few cases have been brought to court, and the topic has been barely addressed by legal scholarship in Lithuania to date. It is unclear whether the fact that the real purpose of the transaction is not a simple reassignment of company shares, but business transfer, results in any differences in the interpretation and application of the law. An especially delicate question, raised in Lithuania and other European countries, is whether the buyer may submit a warranty claim to the seller regarding the business acquired. (shrink)

We investigate the association between a wide range of community-level environmental, social, and governance (ESG) outcomes and the credit risk of U.S. municipal finance fixed-income securities. We develop a novel dataset of multiple ESG outcomes for U.S. counties and connect it to a 2001-2020 panel of municipal bonds issued within those counties. Overall, we find supportive evidence that collective increases in community-level ESG factors (i.e., ESG outcomes) are associated with reductions in credit risk for U.S. municipal finance instruments over time. (...) We theorize that these associations arise from variations in investor perceptions and manifested changes in fiscal health over time as a function of changing ESG outcomes. Post hoc analyses leveraging quasi-exogenous shocks to uncertainty, as well as connecting ESG outcomes to various measures of fiscal health at the county-year level, and credit ratings at the bond-year level, help validate this theory. Our research suggests that even socially agnostic investors should investigate the environmental and social performance of a municipality as part of their credit due diligence. (shrink)

Philosophy lacks criteria to evaluate its philosophical theories. To fill this gap, this essay introduces nine criteria to compare worldviews, classified in three broad categories: objective criteria (objective consistency, scientificity, scope), subjective criteria (subjective consistency, personal utility, emotionality), and intersubjective criteria (intersubjective consistency, collective utility, narrativity). The essay first defines what a worldview is and exposes the heuristic used in the quest for criteria. After describing each criterion individually, it shows what happens when each (...) of them is violated. From the criteria, it derives assessment tests to compare and improve different worldviews. These include the is-ought, ought-act, and is-act first-order tests; the critical and dialectical second-order tests; the mixed-questions and first-second-order third-order tests; and the we-I, we-it, and it-I tests. The essay then applies these criteria and tests to a concrete example, comparing the Flying Spaghetti Monster deity with Intelligent Design. For another application, it draws more general fruitful suggestions for the dialogue between science and religion. (shrink)

Wellbeing is classically considered a bi-product or externality of economic activity, which can either be positively or negatively influenced. This conventional view is returning to the fore in the face of renewed criticisms of ESG reporting standards as leading business astray from its core financial purpose. However, such reactivism overlooks the fact that wellbeing is the functional and overarching aim of human activity, which Aristotle defines as self-actualization. As such, any sound economic system must, in a fundamental way, enhance individual (...) and collective wellbeing. This essay calls for reinforcing social purpose commitments through a capitalism rooted in moral self-awareness in which the common good displaces profit as the sole function of business. According to this picture, profit maintains its proper place as the means of economic transactions, allowing social purpose to take up its proper place as business' central aim. (shrink)

This paper investigates the correlation between excessive ESG disclosure and economic risk, measured through the cost of capital. We analyze a sample comprising 430 S&P 500 US firms over 12 years, from 2011 to 2022. Our findings show that excessive ESG disclosure is associated with a reduction in the cost of capital. Specifically, the environmental and social dimensions of ESG disclosure exhibit explanatory power in decreasing the cost of capital, with the environmental dimension demonstrating particularly strong influence. Conversely, excessive governance (...) disclosure shows no significant impact. Additionally, our study shows that CSR assurance serves as a negative moderator in the relationship between excessive ESG disclosure (including overall excessive ESG score, and environmental and social dimensions) and economic risk. (shrink)

This research explores the dynamic capabilities required for firms to implement environmental, social, and governance strategies, and investigates sustainable management performance that can be created based on them. By using dynamic capabilities theory, we integrate sustainable management and the ESG literature to suggest a research model and identify the factors that act as the catalysts achieving sustainability. The data used for the analysis were collected from 78 firms listed on the Korea Exchange with assets totaling more than 2 trillion Korean (...) won. In this study, the partial least squares structural equation model is applied. We found that absorptive capability and adaptive capability significantly affect sustainable management performance through implementation of the ESG strategy as a mediating variable. In particular, a firm’s implementation of an ESG strategy is a significant determinant that impacts sustainable management performance. We also believe our model contributes to the current knowledge by filling several research gaps, and our findings offer valuable and practical implications not only for achieving sustainable growth but also for creation of competitive advantage. (shrink)

I discuss E. J. Lowe's conception of criteria of identity and sketch a different and, I think, more adequate conception. On my view, criteria of identity are some of the things we can do. They are what we do when distinguishing between single entities of the kind in question and pairs of entities of the relevant domain. And they enable us to make such distinctions because they are applicable to all single and to all pairs of entities of (...) the relevant domain but fulfilled only by all single entities of the kind in question. This feature of criteria of identity allows us to define these criteria, to explain how to identify a particular criterion of identity and to determine the logical form in which to express such identifications. (shrink)

This paper examines whether a firm’s financial performance is associated with superior environmental, social and governance scores in emerging markets of multinationals in Latin America. The study addresses the current research gap on this issue; it develops hypotheses and tests them by applying linear regressions with a data panel drawn from the Thomson Reuters Eikon™ database to analyse data on 104 multinationals from Brazil, Chile, Colombia, Mexico and Peru between 2011 and 2015. The results suggest that the relationship between the (...) ESG score and FP is significantly statistically negative. Furthermore, in examining environmental, social and governance separately to accurately determine each variable’s relationship to multilatinas’ FP, the results reveal a negative relationship. Finally, the empirical analysis provides evidence for a moderating effect of financial slack and geographic international diversification on the relationship between ESG dimensions and firms’ FP. This study furthers understanding of the relationship between ESG dimensions and FP for the Latin American business context. (shrink)