Business
Myth-busting will help accelerate ESG retreat
From the Fraser Institute
By Matthew Lau
In recent years the ESG movement, which holds that corporate managers and investors should consider environmental, social and governance issues to benefit various “stakeholders”—in contrast to the more conventional view that the responsibility of business is to increase its profits for the benefit of its shareholders—has gathered force. Despite considerable evidence of ESG retrenching, it remains in wide currency. However, many points made in its favour are not supported by evidence. It’s important to separate myths from reality.
The Fraser Institute’s ESG essay series is a good resource. In one essay, Steven Globerman reviews the research on ESG scores and investor returns and finds that the claim made by many ESG promoters—that companies with higher ESG scores produce higher investor returns—lacks supporting evidence.
In another essay, 2013 Economics Nobelist Eugene F. Fama notes that competitive market forces better address corporate governance issues than externally imposed top-down structures. Many environmental and social problems too are better handled by bottom-up market forces than top-down initiatives, particularly from government.
Additional essays refute other ESG fallacies including that the ESG movement is the result of widespread demand from individual investors, consumers and workers (in fact, it’s primarily a top-down initiative of elites including government); that regulation-imposed ESG mandates improve corporate governance (they actually make it worse); and that business profit-maximization is harmful to stakeholders other than shareholders (in reality, businesses focusing on profits is generally good for their consumers, employees and suppliers). The entire series is worth reading.
Also worth reading is an article in the Financial Analysts Journal by Alex Edmans, a professor of finance at London Business School, which identifies and refutes 10 common ESG myths including the myth that a focus on shareholder value is harmful because maximizing shareholder value promotes an inefficient focus by management on short-term profit maximization. As Edmans explains, “Finance 101 teaches us that shareholder value is an inherently long-term concept. It is the present value of all future cash flows, from now until the end of time.”
To the extent that financial markets are efficient, expected future profits and losses are reflected in company share prices today, so even if corporate managers care only about today’s stock price, they will still try to maximize long-term value.
Edmans also takes aim at the claim that ESG stocks earn higher returns, again appealing to Finance 10. If ESG actually enhances a company’s shareholder value and this is known, it will be reflected in today’s stock price, so investors who buy the stock shouldn’t expect superior returns. “Feel-good” stocks should actually be expected to generate lower returns because if investors like holding certain stocks for non-financial reasons and dislike holding others, they’ll demand higher returns on the disfavoured stocks than the feel-good ones.
Various other myths include that “more ESG is always better” (in fact, ESG “exhibits diminishing returns and trade-offs exist,” Edmans writes) and that people improve ESG performance by paying for it (if people pay for improvements in some areas, it will cause companies to underweight other ESG dimensions). The final myth often promoted by ESG advocates and refuted in Edmans’s article is that regulation is justified because the market is imperfect. The blindingly obvious counterpoint—government is also imperfect.
ESG may be popular, but careful reading on the topic reveals that many points made in its favour are not supported by evidence. That may be one reason the ESG tide, at least in some places, is retreating.
Author:
Business
CBC’s business model is trapped in a very dark place
I Testified Before a Senate Committee About the CBC
I recently testified before the Senate Committee for Transport and Communications. You can view that session here. Even though the official topic was CBC’s local programming in Ontario, everyone quickly shifted the discussion to CBC’s big-picture problems and how their existential struggles were urgent and immediate. The idea that deep and fundamental changes within the corporation were unavoidable seemed to enjoy complete agreement.
I’ll use this post as background to some of the points I raised during the hearing.
You might recall how my recent post on CBC funding described a corporation shedding audience share like dandruff while spending hundreds of millions of dollars producing drama and comedy programming few Canadians consume. There are so few viewers left that I suspect they’re now identified by first name rather than as a percentage of the population.
Since then I’ve learned a lot more about CBC performance and about the broadcast industry in general.
For instance, it’ll surprise exactly no one to learn that fewer Canadians get their audio from traditional radio broadcasters. But how steep is the decline? According to the CRTC’s Annual Highlights of the Broadcasting Sector 2022-2023, since 2015, “hours spent listening to traditional broadcasting has decreased at a CAGR of 4.8 percent”. CAGR, by the way, stands for compound annual growth rate.
Dropping 4.8 percent each year means audience numbers aren’t just “falling”; they’re not even “falling off the edge of a cliff”; they’re already close enough to the bottom of the cliff to smell the trees. Looking for context? Between English and French-language radio, the CBC spends around $240 million each year.
Those listeners aren’t just disappearing without a trace. the CRTC also tells us that Canadians are increasingly migrating to Digital Media Broadcasting Units (DMBUs) – with numbers growing by more than nine percent annually since 2015.
The CBC’s problem here is that they’re not a serious player in the DMBU world, so they’re simply losing digital listeners. For example, of the top 200 Spotify podcasts ranked by popularity in Canada, only four are from the CBC.
Another interesting data point I ran into related to that billion dollar plus annual parliamentary allocation CBC enjoys. It turns out that that’s not the whole story. You may recall how the government added another $42 million in their most recent budget.
But wait! That’s not all! Between CBC and SRC, the Canada Media Fund (CMF) ponied up another $97 million for fiscal 2023-2024 to cover specific programming production budgets.
Technically, Canada Media Fund grants target individual projects planned by independent production companies. But those projects are usually associated with the “envelope” of one of the big broadcasters – of which CBC is by far the largest. 2023-2024 CMF funding totaled $786 million, and CBC’s take was nearly double that of their nearest competitor (Bell).
But there’s more! Back in 2016, the federal budget included an extra $150 million each year as a “new investment in Canadian arts and culture”. It’s entirely possible that no one turned off the tap and that extra government cheque is still showing up each year in the CBC’s mailbox. There was also a $93 million item for infrastructure and technological upgrades back in the 2017-2018 fiscal year. Who knows whether that one wasn’t also carried over.
So CBC’s share of government funding keeps growing while its share of Canadian media consumers shrinks. How do you suppose that’ll end?
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ESG
Can’t afford Rent? Groceries for your kids? Trudeau says suck it up and pay the tax!
Watch Canada’s Prime Minister tell an anti-poverty group, your ability to buy “groceries for my kids” is less important than sacrificing to pay his carbon tax.
In case you still thought there might be even the tiniest chance Justin Trudeau might come around.. well this settles it. He is as they say, ‘beyond the pale’.
Sure we’ve pieced this together over the last number of years, but it’s still SHOCKING to see him say it directly, proclaim it proudly. This week Trudeau received applause from an audience of the intellectually suffering at something called the “Global Citizen Now” panel discussion on the sidelines of the G20 Leaders’ Summit in Rio.
Much appreciation for the first short video below to Opposition Leader Pierre Poilievre who shared his ferocious reaction to Trudeau’s anti-human comments, challenging the current PM to call an immediate election.
Or course there will be no quick election call. To Justin, it’s more important to cling to the undercarriage of a taxpayer funded jet so he can fly the globe stunning audiences unfortunately already stunned by their utter terror of losing the planet.
In their horror at their inability to turn the switch off and let us all freeze/starve to death this winter, they applaud lovingly for their intellectual leader/sock model as he describes how hard it is to convince angry, hungry people they really need to suck it up.
If only he read a history book.. any history book.. apologies, any book at all. Truly even spending some time with the literary version of an Al Gore video rant would at lest keep JT occupied so he couldn’t speak for a few moments. I’m pretty sure every time he opens his mouth, the temperature in Canada rises as millions of frustrated hotheads (hello there) explode, spewing steam high up into the upper atmosphere where water particles do much more damage to our planet than the final exhaling of a non grocery-eating-planet-loving-Canadian.
Watch Pierre Poilievre’s video and assuage the ensuing headache by mapping out your route to a polling booth. If this doesn’t sell a couple of those ‘Axe the Tax’ shirts for the Poilievre team, well.. enjoy your stroll to the foodbank.
Here’s a link to his entire discussion. If you have a strong stomach and 20 minutes of your life to donate to a higher cause… No silly, not the intended cause of the anti-poverty group… But to the intellectual cause of understanding just how twisted the logic has become for those who fly around the world to wine and dine, only to break long enough to tell us they think it’s perfectly fine if we can’t buy groceries for our kids.
By the way, please save a bit of your shock and disappointment for the hapless host of the ‘anti-poverty’ Global Citizen. This was apparently on the sidelines of a G20 Summit. I would expect this drivel to be called out at a respectable middle school debate. Apparently the ‘anti-poverty’ Global Citizen people aren’t overly concerned with poverty. Do we need to say that not being able to afford groceries is in fact THE definition of poverty? Or course not. It would be much easier for them to change their name to Former Global Citizens.
You were warned.
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