When Will Investors Vote for Socially Beneficial but Costly ESG Policies?  

Investors are increasingly interested in whether firms implement environmental, social, and governance (ESG) policies that, for example, reduce the firms’ carbon footprints, diversify their workplaces, or better protect customers’ private information. Some socially beneficial policies (e.g., improving energy-efficiency) may also improve shareholder wealth or would do so with appropriate government actions (e.g., given a carbon tax). However, political realities, and the exhaustion of opportunities that are not costly to the firm, will increasingly present firms with a social dilemma: whether to adopt a policy that benefits society but does not benefit the firm enough to cover its cost. For example, … Read more