ESG investing is about long-term risk management
The market is good at evaluating and pricing systemic risks that are regular and easy to quantify--the "known unknown." These include things like changes in the business cycle or interest rates. But as the coronavirus pandemic has shown, the market doesn't do as well with risks that are difficult to predict or quantify--the "unknown unknowns." The environmental, social, and governance risks most firms face fall somewhere in the middle of this spectrum.
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