The Impact of ESG Scores on Asset Prices

The cost of ethical investing seems to be lower returns in the long run. While companies with high environmental, social, and governance (ESG) scores have relatively high returns today, the increased demand in these stocks is said to yield lower returns once a new equilibrium has been established. Because they trade at a higher price-to-earnings ratio, ESG stocks will have a lower cost of capital, which results in a lower expected return for shareholders — a small price to pay to express their values to the public. Read full article here

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