22 Questions
What is the proposed Coasian bargain called by Adrian, Bolton, and Kleinnijenhuis?
The great carbon arbitrage
What are the estimated costs of coal according to the IMF WP by Adrian, Bolton, and Kleinnijenhuis?
$78 trillion (1.2% of GDP, $125 per tonne of coal)
What is the ERISA rule under the DOL governing in terms of private sector company pension plans?
Horizon, risk tolerance, and expected return
Why is it important to consider if ESG funds can be selected as the QDIA (Qualified Default Investment Alternative)?
Many participants select the QDIA by default
What are some forces necessary for change to occur at interpersonal, societal, and institutional levels?
Habit formation, psychology of change, global disinvestment, societal pressure
Give an example of an external factor that led to significant change in a societal structure.
Global disinvestment and pressure against Apartheid in South Africa
What is the practice of presenting guidance suggesting an ESG perspective when the majority of data suggests a contrary perspective?
Greenwashing
Define economic externality in the context of ESG investing.
An economic externality is a cost or benefit that is unrelated to any behavior of that party.
What are some examples of positive externalities mentioned in the text?
Universities providing economic spinoffs, research and development, an educated workforce, or cultural events.
What is the common solution to negative externalities mentioned in the text?
Taxation, most commonly a Pigovian tax.
Who is the Coase Theorem named after?
Arthur Pigou
According to the Coase Theorem, what can the affected parties do to reach an efficient outcome?
Negotiate a mutually beneficial bargain.
What does the Coase Theorem assume regarding transaction costs?
It assumes transaction costs are zero.
How does the Coase Theorem propose to address conflicts of property rights?
By allowing parties to negotiate an efficient outcome.
What is the main role of government in the context of the Coase Theorem?
Assigning property rights.
Why can the Coase Theorem be difficult to implement in certain situations?
When there are many agents, large transaction costs, and enforcement costs.
Define greenwashing in the context of ESG investing.
Greenwashing refers to the deceptive practice of promoting environmentally friendly products or initiatives to mask a company's harmful practices.
Explain the economic underpinnings of ESG investing.
ESG investing integrates environmental, social, and governance factors into investment decisions to generate long-term competitive financial returns and positive societal impact.
What are externalities in the context of ESG investing?
Externalities are the positive or negative consequences of economic activities that affect parties not directly involved in the activity.
Explain the Coase Theorem in relation to ESG investing.
The Coase Theorem states that in the presence of property rights and low transaction costs, parties can negotiate efficient solutions to externalities without government intervention.
What is a Pigovian tax and how does it relate to ESG investing?
A Pigovian tax is a tax imposed on goods that create negative externalities, such as pollution, to internalize the social costs of the activity. In ESG investing, advocating for Pigovian taxes aligns with promoting sustainable practices and reducing harm to society and the environment.
Discuss the implications of the Pigou Club in the context of ESG investing.
The Pigou Club advocates for the use of Pigovian taxes to address environmental issues and internalize external costs. In ESG investing, supporting the Pigou Club's principles can lead to more sustainable investment decisions and positive societal outcomes.
Explore various studies on ESG financial performance, including insights on neglected stocks, carbon risk premium, employee satisfaction, and aggregate changes in performance. Learn about the implications of ESG factors in finance.
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