The Theocratic Trifecta: The Allure and False Promise of ESG, Sustainability and Stakeholder Wealth

This is not a video that I expect most of you to not watch, for many reasons. First, it is insanely long (more than 3 hours), breaking almost every rule in the online video rulebook. Second, everything that I say in this video, I have said before either in my classes or individual posts. That said, you may still find it useful because it consolidates all the arguments against three ideas that I have seen marketed relentlessly as counters to conventional business first principles, and shows how these concepts connect to each other. 1. Sustainability: It is the business buzzword of the moment, with sustainability centers funded around the idea and classes with it in the title. While I understand the push for sustainable living and a planet, I find the notion of corporate sustainability nonsensical, since corporations are legal entities that should go away, when their reason for existence disappears. 2. Stakeholder Wealth Maximization: Should a well run business consider the needs and interests of the many stakeholders in it (lenders, employees, customers, society)? Of course, but the idea that you can maximize all of their competing interests is an idea that only a law school professor will think is a good one. 3. ESG: No business acronym has ever acquired as large a following as this one, and I have written and talked about the multiple ways in which it can go wrong. My description of ESG as a concept born in sanctimony, nurtured in hypocrisy and sold with sophistry summarizes how I feel about it. I use "Theocratic" to bind these bad ideas together because they have marketed with religious fervor, and the Ayatollahs of the space have used virtue (or their definitions of it) as a defense against arguments. The buy in by consultants (McKinsey, are you listening), academics (who have provided cover and manufactured research to back it up), fund managers (with fiduciary responsibilities) has been astonishing. If you are an ESG advocate, or worse still, actually work in the space, I hope that you do get a chance to watch the session. It may infuriate you, and you may disagree with my arguments, but I don't think you will find it boring. Slides: pages.stern.nyu.edu/~adamodar/pdfiles/blog/TheoTri… Previous blog posts: 1. aswathdamodaran.blogspot.com/2019/08/from-sharehol… 2. aswathdamodaran.blogspot.com/2020/09/sounding-good… 3. aswathdamodaran.blogspot.com/2021/09/the-esg-movem… 4. aswathdamodaran.blogspot.com/2022/03/esgs-russia-t…

• #education
• #corporate
• #finance