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Economy

ESG rankings have no significant effect on investment performance of Canadian public companies

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From the Fraser Institute

By Steven Globerman

Despite claims to the contrary, the ESG rankings of publicly-traded Canadian companies have no significant effect on investment returns, finds a new study published today by the Fraser Institute, an independent, non-partisan Canadian
public policy think-tank.

“While government regulators and some industry executives promote the benefits of ESG investing, there’s no evidence of significant advantages for investors,” said Steven Globerman, senior fellow at the Fraser Institute and author of ESG Investing and Financial Returns in Canada.

Environmental, social and governance (ESG) is a movement designed to pressure businesses and investors to pursue larger social goals. In Canada, due to government securities regulation, publicly-traded companies must disclose ESG-related
information on a range of issues including environmental impact, human rights, and equity and inclusion.

ESG advocates claim that government-mandated ESG disclosures improve the financial performance of companies.
However, the study—the first empirical analysis of the relationship between changes in the ESG rankings of Canadian publicly-traded companies and equity returns— tracked 310 companies on the Toronto Stock Exchange from 2013 to 2022 and found no significant relationship between changes in ESG ranking (upgrades or downgrades) and financial returns, as measured by the price of shares and dividend income.

In other words, advocates for greater ESG disclosures cannot accurately claim—based on Canadian evidence—that requiring companies to provide more information for ESG rankings will significantly affect the financial performance of Canadian
investors.

“Better performance on ESG rankings simply does not translate into better financial performance for Canadian firms,” Globerman said.

  • ESG investing incorporates environmental (E), social (S), and governance (G) considerations into investment decisions. Until recently, ESG-themed investing comprised an increasing share of investments made by professional money managers and retail investors.
  • Financial industry executives and regulators who have promoted ESG-themed investing argue that it will enhance investment performance either by increasing asset returns and/or by reducing investment risk.
  • However, empirical studies, on balance, find no consistent and statistically significant evidence of a positive relationship between the ESG rankings of individual companies or portfolios of companies and the financial performances of those companies or investment portfolios.
  • Most empirical studies have focused on US-based publicly traded companies. To our knowledge, this study is the first to focus on returns to ESG-themed investing for Canadian-based public companies.
  • Using data from MSCI, a leading ESG ratings provider, we estimate the statistical relationship between changes in ESG rankings of companies and changes in equity returns for those companies using a sample of 310 companies listed on the Toronto Stock Exchange between 2013 and 2022.
  • Our study finds that neither upgrades nor downgrades in ESG ratings significantly affect stock market returns.

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Canadian Constitution Foundation in court this week intervening in “plastics ban” case

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From the Canadian Constitution Foundation

“In this case, criminal law power should not be allowed to justify the sweeping inclusion of every imaginable plastic product on the list of ‘toxic’ substances and therefore under the umbrella of federal authority,” … “The Cabinet Order plastic ban is outside the scope of the federal power.”

The Canadian Constitution Foundation (CCF) is appearing as an intervener in the legal challenge to the federal “plastics ban” being heard on June 25 and 26 at the Federal Court of Appeal. The CCF will be arguing that the federal “plastics ban” is outside the jurisdiction of Parliament’s criminal law power.

In November 2023, a Federal Court of Canada judge struck down the Trudeau government’s Cabinet Order declaring all “plastic manufactured items” as “toxic” under the List of Toxic Substances in Schedule 1 of the Canadian Environmental Protection Act. The Order had been challenged by a coalition of plastics companies who had argued that the Order was unreasonable and unconstitutional.

The appeal of that decision is now being heard at the Federal Court of Appeal. At issue is the scope of the federal law power. Section 91(27) of the Constitution Act grants the federal government exclusive authority to make criminal law. Previous court rulings have found and affirmed that prohibiting truly toxic substances, like lead and mercury, under the Canadian Environmental Protection Act is a legitimate expression of that power. But the criminal law power cannot be used to justify the sweeping inclusion of every imaginable plastic product onto the list of “toxic” substances and therefore under federal authority.

CCF Litigation Director, Christine Van Geyn said: “The criminal law power is not a magical incantation. Invoking the words ‘criminal law’ does not transform any issue into something Ottawa can regulate.”

“In this case, criminal law power should not be allowed to justify the sweeping inclusion of every imaginable plastic product on the list of ‘toxic’ substances and therefore under the umbrella of federal authority,” Van Geyn added “The Cabinet Order plastic ban is outside the scope of the federal power.”

The CCF is intervening in the case to argue about the scope of federal criminal law power. Criminal law powers should be applied cautiously. To claim authority to regulate something based on federal criminal law power, Parliament must clearly demonstrate the criminal aspect of the targeted activities. The federal government cannot assume control over an entire area which is not, in itself, harmful or dangerous. This is particularly important when Parliament has asserted control and jurisdiction over an amorphous subject matter prone to overlapping jurisdictions, like environmental regulation.

The Canadian Constitution Foundation is represented in its intervention by Brett Carlson and Rebecca Lang of Borden Ladner Gervais LLP.

You can read the CCF’s intervener factum here.

Christine Van Geyn
Canadian Constitution Foundation

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Economy

‘What constitutes a border crisis?’ Sanctuary cities have found out

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Migrants and migrant bedding inside O’Hare International Airport in Chicago.                 

From The Center Square

By

Yeah, you liked them when it wasn’t your problem because you’re not a border state. And then when they show up in Chicago and New York, you’re like ‘What the [expletive] are we going to do with these people?’”

In March 2021, the Los Angeles Times published a story with a headline that asked, “What constitutes a border crisis?”

The story quoted then House Republican Leader Kevin McCarthy as saying, “There is no other way to claim it than a Biden border crisis.”

Then the LA Times asked, “But is it a crisis?”

Just a month later in April 2021, New York City Mayor Bill de Blasio released a statement about his city being a sanctuary city.

“New York City is proud to be a welcoming and inclusive city for immigrants,” de Blasio said at the time.

The debate in the U.S. on migrants took off in April 2022 when Texas Gov. Greg Abbott decided to take a stand against President Joe Biden and what Abbott called an open border policy.

Abbott stated that Biden’s repeal of Title 42 – a pandemic-era policy that allowed the government to quickly expel arriving asylum seekers – had created an “unprecedented surge of illegal aliens” into the country with as many as 18,000 apprehensions a day.

Abbott said that Texas border towns were being overrun by migrants and were overwhelmed. His solution was to bus many of the arriving migrants to sanctuary cities across the U.S.

In August 2022, when the first bus of migrants leaving Texas arrived in New York, Abbott was clear why he had his state paid for the trip. New York had a new mayor by then.

“New York City is the ideal destination for these migrants, who can receive the abundance of city services and housing that Mayor Eric Adams has boasted about within the sanctuary city,” Abbott stated in a news release. “I hope he follows through on his promise of welcoming all migrants with open arms so that our overrun and overwhelmed border towns can find relief.”

And just over a year later, New York Gov. Kathleen Hochul was on CNN in September 2023 pleading with immigrants to “go somewhere else.”

How it has played out was not lost on liberal comedian Bill Maher.

“Could everyone just stop the posturing?” Maher said on a July 2023 podcast with Sharon Osbourne. “Don’t pretend that you love migrants so much and then when we send them to you, you don’t like them. You know? You’re full of [expletive]. And we can see that. Yeah, you liked them when it wasn’t your problem because you’re not a border state. And then when they show up in Chicago and New York, you’re like ‘What the [expletive] are we going to do with these people?’”

New York wasn’t the only destination for Abbott’s buses. He also targeted other sanctuary cities, such as Washington, D.C, Chicago and Denver.

The New York Times published an article in July 2023 that had a headline that asked, “Is Texas’ Busing Responsible for the Migrant Crisis Across Cities?”

On June 14, Abbott’s office stated that it had bused 119,200 migrants to six sanctuary cities since August 2022. That included 45,700 migrants to New York City and 36,900 migrants to Chicago since August 2022. There were also 19,200 migrants bused to Denver since May 2023 and 12,500 migrants bused to Washington D.C. since April 2022.

But Abbott wasn’t alone in busing migrants from the border to locations throughout the country. The Democratic-run city of El Paso also bused migrants north.

Democratic Arizona Gov. Katie Hobbs stated in September 2023 that Arizona was “overwhelmed” by the flow of migrants into her state. Arizona spent $10.5 million transporting 10,247 migrants out of state as of September 2023.

That’s just part of a bigger surge of migrants into the U.S. Since Biden took office in January 2021, about 12 million illegal border crossings have been documented, according to U.S. Customs and Border Protection data and a compilation of “gotaway” data obtained from border agents by The Center Square. Gotaways is the official CBP term to describe those who illegally crossed the border between ports of entry but who were not apprehended. CBP does not publicly release “gotaway” data.

The increase in migrants has hammered the budgets of sanctuary cities.

Washington, D.C. created an Office of Migrant Services with an initial start-up cost of $10 million in 2022. In 2025, the city budgeted $39 million for that office.

Chicago has spent $299 million on migrants since 2022, according to a March 2024 report by the Illinois Policy Institute, and that does not include the hundreds of millions of dollars state taxpayers have paid for costs such as migrant health care.

New York City Mayor Adams said in August 2023 the migrant crisis may cost his city $12 billion over three years.

The city of Denver stated in April 2024 that the increase in migrants has cost it $63 million.

The cost to taxpayers in the state of Texas was $13.4 billion in 2023, according to the Federation For American Immigration Reform. Only California had a higher cost at $30.9 billion.

Ira Mehlman, spokesman for the Federation For American Immigration Reform, said Abbott’s busing strategy has worked.

“His busing policy exposed the hypocrisy of many sanctuary jurisdiction politicians who extolled the virtues of mass immigration regardless of its legality, but are not so happy when they actually have to deal with the real impact of large numbers of migrants,” Mehlman said in an email to The Center Square. “So long as it was someone else’s problem, they were happy to virtue signal and criticize others. Once it became their problem, they demanded that Abbott and others stop sending them migrants. For years, these sanctuary proponents claimed that illegal aliens were a benefit to the country, but are now demanding federal assistance to manage to cover their costs, exposing the fact that illegal immigration imposes huge fiscal costs.”

Managing Editor

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