Environmental, Social, and Governance Criteria: Why Investors Should Care

Rapid growth over the past few decades has created environmental stress that can incite sudden changes in regulation and consumer behavior

Unanticipated regulation and deregulation can lead to sudden moves in asset prices

Investor can use ESG criteria to identify firms that are well prepared to deal w changes in regulations and consumer preferences

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For a money manager, it may seem that focusing on ESG considerations will hurt investment returns

However, environmental crises are likely to cause sudden changes in regulations, technology and consumer tastes

These rapid changes can cause large swings in asset prices, leaving investors with little time to react

By incorporating ESG criteria into their investment strategy, managers can select firms which are well prepared to deal with these changes

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