Under perfect working capitalism, consumers decide what should be produced and how. Investors should select the most profitable producers based on this demand from consumers. ESG investing is absurd.
The basic assumptions underlying your statement are that (i) consumers know what they want to consume and are perfectly rational in weighing short-term vs. long-term costs and benefits as well as externalities on top of price, and (ii) that producers optimise for shareholders only and that shareholder value maximisation is long-term efficient.
But people don't always make fully-informed decisions. Leaded gasoline and paint and Red Dye #2 worked great, until it was shown that they didn't ... perhaps explaining recent brain-dead decisions on the part of those extensively exposed to them. Long-tail environmental impacts of at-the-time rational purchase decisions didn't manifest themselves until recently (microplastics, fast fashion, greenhouse effect; boiling a frog in a saucepan and all that). Society can't do an immediate about-face (although CFC bans were one example of where it actually worked https://en.m.wikipedia.org/wiki/Montreal_Protocol ), but it doesn't mean that efforts should be completely abandoned.
Not to get on a soapbox, but there's a lot of "whataboutism" when people point out that China and the rest of the third world's industrialization is responsible for much of the last quarter century's carbon emissions, but the west was complicit in that as we basked in the avalanche of cheap stuff; had it all been produced domestically, we'd've emitted it (and more) too ... and at least they're trying to balance their energy sources to renewables.
I'm a bit of an "offender" myself driving big 4x4s, but we pay for the (non-usage-tested) privilege as they mostly sit dead in the garage whilst most of our errands are performed on bikes. Do I agree with some of the more preposterous "virtue signaling" elements (Germany eliminating nuclear, "unscrew your refrigerator light bulbs before going to bed" hair shirt quasi-religious measures, unobtainable emissions standards that do more harm than good)? No. But if standards aren't set with a greater goal in mind, we'd still have un-belted kids going through car windshields and people running inefficient appliances ad infinitum. If the "invisible hand" really worked, most of the higher standards, the knock-on effects of which we enjoy, would've never been implemented.
Don’t worry about your Land Rover. Flying across the Atlantic and back in economy class emits about as much CO2 as driving an SUV for a year. Given both our jobs, I think we have a lifetime carbon footprint that is far too large anyway, no matter what we do now. But we can still try. I for one love my EV and all the electricity in my house is renewable or nuclear.
No, (i) I don't think so, but what is the option? Consumers are already making the choices and they must learn to become better at it. Producers should produce what they think is good and push it on to consumers. I find it very strange though that investors should follow their own ideals. Capitalism is a success because it allocates resources to where they are most profitable, best used. Nothing else. Shareholder value maximation is, not short-term, but long-term efficient.
Under perfect working capitalism, consumers decide what should be produced and how. Investors should select the most profitable producers based on this demand from consumers. ESG investing is absurd.
The basic assumptions underlying your statement are that (i) consumers know what they want to consume and are perfectly rational in weighing short-term vs. long-term costs and benefits as well as externalities on top of price, and (ii) that producers optimise for shareholders only and that shareholder value maximisation is long-term efficient.
I have serious doubts about both assumptions.
But people don't always make fully-informed decisions. Leaded gasoline and paint and Red Dye #2 worked great, until it was shown that they didn't ... perhaps explaining recent brain-dead decisions on the part of those extensively exposed to them. Long-tail environmental impacts of at-the-time rational purchase decisions didn't manifest themselves until recently (microplastics, fast fashion, greenhouse effect; boiling a frog in a saucepan and all that). Society can't do an immediate about-face (although CFC bans were one example of where it actually worked https://en.m.wikipedia.org/wiki/Montreal_Protocol ), but it doesn't mean that efforts should be completely abandoned.
Not to get on a soapbox, but there's a lot of "whataboutism" when people point out that China and the rest of the third world's industrialization is responsible for much of the last quarter century's carbon emissions, but the west was complicit in that as we basked in the avalanche of cheap stuff; had it all been produced domestically, we'd've emitted it (and more) too ... and at least they're trying to balance their energy sources to renewables.
I'm a bit of an "offender" myself driving big 4x4s, but we pay for the (non-usage-tested) privilege as they mostly sit dead in the garage whilst most of our errands are performed on bikes. Do I agree with some of the more preposterous "virtue signaling" elements (Germany eliminating nuclear, "unscrew your refrigerator light bulbs before going to bed" hair shirt quasi-religious measures, unobtainable emissions standards that do more harm than good)? No. But if standards aren't set with a greater goal in mind, we'd still have un-belted kids going through car windshields and people running inefficient appliances ad infinitum. If the "invisible hand" really worked, most of the higher standards, the knock-on effects of which we enjoy, would've never been implemented.
Don’t worry about your Land Rover. Flying across the Atlantic and back in economy class emits about as much CO2 as driving an SUV for a year. Given both our jobs, I think we have a lifetime carbon footprint that is far too large anyway, no matter what we do now. But we can still try. I for one love my EV and all the electricity in my house is renewable or nuclear.
No, (i) I don't think so, but what is the option? Consumers are already making the choices and they must learn to become better at it. Producers should produce what they think is good and push it on to consumers. I find it very strange though that investors should follow their own ideals. Capitalism is a success because it allocates resources to where they are most profitable, best used. Nothing else. Shareholder value maximation is, not short-term, but long-term efficient.