LIKE many topics that inspire passion and thoughtful debate, environmental, social and governance (ESG) investing is complex and multifaceted. Unfortunately, at least in the US, ESG investing has become politicised, which makes nuanced perspectives and analysis increasingly difficult.
If only there was an economic theory we could leverage to rise above the binary, politicised landscape, that would help us understand the different impacts of ESG analysis on risk and expected return and how such considerations should or should not influence portfolio construction for different investors.
Fortunately, we do have such a theory: the popularity asset pricing model (PAPM).
Most finance and investment...
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