The integration of ESG into mainstream investment decision making is becoming increasingly popular. But what are some of the factors/ challenges that investors face in doing so?
Hi. Very good question. Actually... it is the question! In my opinion, the main challenge is how to make that executive levels in companies really believe that ESG is useful for make a more profitable activity. An annexed challenge is to change to focus into the medium-long trend (not in the short one). A possible argument could be this one (a "more forced" one): environmental issues arrived to corporation... and remains; social aspects and governance aspects of the company are following the same steps that environment followed last 40 years... So pay attention, because they are arriving... to stay and remain.
Hi, here are some suggestions:
1) Environment as public good: Existing opportunities for externalising costs of environmental degradation, lack of prices for use of natural resources
2) opportunity costs of investments: Even if investments in environmental goods pay of, there may be other investment opportunities with higher pay offs
3) Lack of information: In particular throughout the value chains it is challenging to get the data on environmental resource consumption, similar when it comes to indirect or induced impacts of investments.
Hi,
You may be intetrested by this ^paper:
Corporate social responsibility and capital allocation efficiency
Journal of CorporateFinance, April 2017, vol 43, Pages 354-377
Avishek Bhandari, David Javakhadze
Best regards
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