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Market Forces Already Address ESG and “Stakeholder Capitalism”
Fraser Institute

Market Forces Already Address ESG and “Stakeholder Capitalism”

Concerns (ESG: Myths and Realities)

THUNDER BAY, ONTARIO ~~~~~  November 26, 2022 (LSNews)  If you follow the news, you’ve likely heard of something called ESG investing, an acronym meant to spell out a set of behavioural standards for firms.

But competitive market forces are likely to be more effective and efficient than externally imposed “top-down” governance structures with catchy names like stakeholder capitalism, or ESG, which are rife with unintended consequences.

In fact, ESG activism is likely to accomplish more by working through consumer tastes than investor tastes. Each consumer can react to each ESG action taken by a specific producer or manufacturer according to their tastes.

or example, if consumers opt for free-range chicken and beef, which is more expensive to produce than if the farmer uses alternative and possibly less humane production techniques, firms will provide free-range poultry and meat without being directed to do so through government regulations. Consumers vote at the checkout line and the economy produces the “right” amount of free-range poultry and meat. By responding to consumers’ preferences, firms operating in competitive markets already provide solutions to many environmental and social problems.

Generally, bottom-up market forces, while imperfect, better address the issues raised by proponents of stakeholder capitalism and ESG than top-down government initiatives.

Author:

Eugene F. Fama

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The Fallacies Undermining Energy Security (ESG: Myths and Realities)

The Fallacies Undermining Energy Security

The Fallacies Undermining Energy Security (ESG: Myths and Realities)

Robert R. McCormick Distinguished Professor of Finance, University of Chicago

Russia’s invasion of Ukraine is not only causing grievous harm to the Ukrainian people but is also triggering the need for a sensible recalibration of energy policy, especially by western democracies that are manifestly obsessed with climate change.

Canada and the United States should both hit the pause button on climate orthodoxy so they can unleash their extensive oil and gas resources to help staunch inflation, bolster growth at home, and seek to displace Russia as the key supplier to Europe and other markets. The wrong climate policy at the wrong time gave Russian President Vladimir Putin an undeserved financial bonus (in the form of higher oil and natural gas prices) enabling his brutal assault on his neighbour. Oil and gas are vital to our mutual security and our energy advantages should not be frittered away to geopolitical adversaries or sacrificed to illusory climate change prophecies.

But Canada has made no moves to strengthen energy security. Instead, it has doubled down on climate change, increasing the carbon tax and announcing a $9.1 billion plan to reduce carbon emissions by at least 40 percent below 2005 levels by 2030. Expecting the goal to be met by relying on such renewables as wind, solar, and biomass stretches credulity. The fact that the plan was presented without a detailed analysis of the economic consequences is irresponsible. Since Canada has missed every goal it has ever set, it is not a serious plan, either.

Successful investing—the deployment of capital based on expectations of future returns—is grounded in realism, not fantasy or pseudo-science. Constraints on supply, as implemented by Canada and the US, inevitably drove up oil and gas prices, making Canadians and Americans poorer and Putin richer.

A more realistic and expansive approach to energy would help contain inflationary pressures and serve our geopolitical security interests. And ensuring access to reliable, affordable energy is vital to our economic growth and national security.

Author:

Derek H. Burney

Chairman, Burney Investment Group and Enablence Technology Inc.

 


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    The Fraser Institute is an independent, non-partisan research and educational organization based in Canada. We have offices in Calgary, Montreal, Toronto, and Vancouver. Visit our Website 

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