Question A:
In pursuing social and environmental initiatives, the average public company generates more benefits than costs in terms of profits.
Responses
Responses weighted by each expert's confidence
Question B:
In pursuing social and environmental initiatives, public companies would benefit from a measurably lower cost of capital.
Responses
Responses weighted by each expert's confidence
Question C:
There are substantial social benefits when managers of public companies make choices that account for the impact of their decisions on customers, employees, and community members beyond the effects on shareholders.
Responses
Responses weighted by each expert's confidence
Question A Participant Responses
| Participant | University | Vote | Confidence | Bio/Vote History |
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 Franklin Allen |
Imperial College London | Bio/Vote History | ||
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Obviously it depends on what the firm is doing in each case. However, it is certainly possible that they can generate more benefits than the cost in profits.
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 Pol Antras |
Harvard | Bio/Vote History | ||
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 Olivier Blanchard |
Peterson Institute | Bio/Vote History | ||
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The financial rewards come from image improvement, more and more enthusiastic consumers. This is likely to be marginal in most cases.
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 Richard William Blundell |
University College London | Bio/Vote History | ||
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 Maristella Botticini |
Bocconi | Bio/Vote History | ||
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 Agnès Bénassy-Quéré |
Paris School of Economics | Bio/Vote History | ||
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The "greenium" is slightly positive. The problem is that green investment generates a return only over the long term, provided green policies are effectively deployed. Hence highly uncertain.
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 Elena Carletti |
Bocconi | Did Not Answer | Bio/Vote History | |
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 Jean-Pierre Danthine |
Paris School of Economics | Bio/Vote History | ||
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IN pure financial terms initiatives that are positive for the environment may be costly as long as externalities are not priced (e.g. carbon tax)
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 Paul De Grauwe |
LSE | Bio/Vote History | ||
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 Jan Eeckhout |
UPF Barcelona | Bio/Vote History | ||
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 Xavier Freixas |
Barcelona GSE | Did Not Answer | Bio/Vote History | |
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 Nicola Fuchs-Schündeln |
Goethe-Universität Frankfurt | Did Not Answer | Bio/Vote History | |
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 Jordi Galí |
Barcelona GSE | Bio/Vote History | ||
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 Luis Garicano |
LSE | Did Not Answer | Bio/Vote History | |
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 Yuriy Gorodnichenko |
Berkeley | Bio/Vote History | ||
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 Rachel Griffith |
University of Manchester | Bio/Vote History | ||
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 Veronica Guerrieri |
Chicago Booth | Bio/Vote History | ||
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 Luigi Guiso |
Einaudi Institute for Economics and Finance | Bio/Vote History | ||
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If they pursue soc resp is because is profitable
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 Sergei Guriev |
Sciences Po | Bio/Vote History | ||
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 Patrick Honohan |
Trinity College Dublin | Bio/Vote History | ||
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Too many cases of greenwashing these days to be confident of positive net effects. But much potential for many firms (and some historic successes) to improve ESG outcomes with positive (or minimally adverse) long term impact on profits.
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 Beata Javorcik |
University of Oxford | Bio/Vote History | ||
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 Jan Pieter Krahnen |
Goethe University Frankfurt | Bio/Vote History | ||
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It all depends upon customer response to firms' CSR activities. If customers value CSR activities more than the accompanying increase in production costs, then profits may rise. If they are indifferent as to CSR, they will not accept higher prices, and firm profits will fall.
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 Botond Kőszegi |
Central European University | Bio/Vote History | ||
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 Eliana La Ferrara |
Harvard Kennedy | Bio/Vote History | ||
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 Christian Leuz |
Chicago Booth | Bio/Vote History | ||
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Unlikely that E&S initiatives on average increase profits as otherwise we wouldn't have so many environm. & soc. problems. Many studies suggest a positive relation for such initiatives but plagued by selection&endogeneity. Avoiding externalities should typically cost firms money.
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 Thierry Mayer |
Sciences-Po | Bio/Vote History | ||
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 Costas Meghir |
Yale | Bio/Vote History | ||
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 Marco Pagano |
Università di Napoli Federico II | Bio/Vote History | ||
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 Lubos Pastor |
Chicago Booth | Bio/Vote History | ||
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 Richard Portes |
London Business School | Bio/Vote History | ||
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 Canice Prendergast |
Chicago Booth | Bio/Vote History | ||
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 Carol Propper |
Imperial College London | Bio/Vote History | ||
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 Imran Rasul |
University College London | Bio/Vote History | ||
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 Lucrezia Reichlin |
London Business School | Did Not Answer | Bio/Vote History | |
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 Ricardo Reis |
London School of Economics | Bio/Vote History | ||
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Unless the initiatives are perfectly aligned with profits (unlikely) there will be trade-offs. I worry more that these initiatives are loosely defined so they end up giving free rein for managers to pursue own interests, hurt governance, and enhance principal-agent problems.
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 Rafael Repullo |
CEMFI | Bio/Vote History | ||
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 Hélène Rey |
London Business School | Did Not Answer | Bio/Vote History | |
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 Antoinette Schoar |
MIT | Bio/Vote History | ||
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 Kjetil Storesletten |
University of Minnesota | Bio/Vote History | ||
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 Daniel Sturm |
London School of Economics | Bio/Vote History | ||
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 Silvana Tenreyro |
LSE | Bio/Vote History | ||
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 Rick Van der Ploeg |
Oxford | Bio/Vote History | ||
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 John Vickers |
Oxford | Bio/Vote History | ||
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 Hans-Joachim Voth |
University of Zurich | Bio/Vote History | ||
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 Karl Whelan |
University College Dublin | Did Not Answer | Bio/Vote History | |
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 Charles Wyplosz |
The Graduate Institute Geneva | Bio/Vote History | ||
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Question B Participant Responses
| Participant | University | Vote | Confidence | Bio/Vote History |
|---|---|---|---|---|
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Franklin Allen |
Imperial College London | Bio/Vote History | ||
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Yes, I agree with this. In the long run firms will need to a lower cost of capital to survive against competing firms that do not pursue environmental policies that are costly.
-see background information here |
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Pol Antras |
Harvard | Bio/Vote History | ||
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Just about any company would!
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Olivier Blanchard |
Peterson Institute | Bio/Vote History | ||
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I am skeptical as to how many investors, especially the large ones will be willing to lend at lower rates. Again, likely to be a marginal effect
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Richard William Blundell |
University College London | Bio/Vote History | ||
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Maristella Botticini |
Bocconi | Bio/Vote History | ||
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Agnès Bénassy-Quéré |
Paris School of Economics | Bio/Vote History | ||
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Elena Carletti |
Bocconi | Did Not Answer | Bio/Vote History | |
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Jean-Pierre Danthine |
Paris School of Economics | Bio/Vote History | ||
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with the agreed definition of measurably
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Paul De Grauwe |
LSE | Bio/Vote History | ||
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Jan Eeckhout |
UPF Barcelona | Bio/Vote History | ||
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Xavier Freixas |
Barcelona GSE | Did Not Answer | Bio/Vote History | |
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Nicola Fuchs-Schündeln |
Goethe-Universität Frankfurt | Did Not Answer | Bio/Vote History | |
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Jordi Galí |
Barcelona GSE | Bio/Vote History | ||
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Luis Garicano |
LSE | Did Not Answer | Bio/Vote History | |
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Yuriy Gorodnichenko |
Berkeley | Bio/Vote History | ||
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Rachel Griffith |
University of Manchester | Bio/Vote History | ||
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Veronica Guerrieri |
Chicago Booth | Bio/Vote History | ||
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Luigi Guiso |
Einaudi Institute for Economics and Finance | Bio/Vote History | ||
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Sergei Guriev |
Sciences Po | Bio/Vote History | ||
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Patrick Honohan |
Trinity College Dublin | Bio/Vote History | ||
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That would imply ESG investments underperforming.
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Beata Javorcik |
University of Oxford | Bio/Vote History | ||
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Jan Pieter Krahnen |
Goethe University Frankfurt | Bio/Vote History | ||
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Equilibrium effects of preference-driven stock picking (i.e. selective portfolio composition) are likely to be small at best. Because different investors have different preferences, inducing arbitrage operations that, in equilibrium, equalize risk adjusted cost of capital.
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Botond Kőszegi |
Central European University | Bio/Vote History | ||
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Eliana La Ferrara |
Harvard Kennedy | Bio/Vote History | ||
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Christian Leuz |
Chicago Booth | Bio/Vote History | ||
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It is possible that pursuing some E&S activities (or engaging in CSR) could lower firm risks and be rewarded by markets with a lower CoC. But I doubt it is true on average for the same reason as first Q. The evidence so far is also mixed.
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Thierry Mayer |
Sciences-Po | Bio/Vote History | ||
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Costas Meghir |
Yale | Bio/Vote History | ||
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Marco Pagano |
Università di Napoli Federico II | Bio/Vote History | ||
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Lubos Pastor |
Chicago Booth | Bio/Vote History | ||
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Richard Portes |
London Business School | Bio/Vote History | ||
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Canice Prendergast |
Chicago Booth | Bio/Vote History | ||
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Carol Propper |
Imperial College London | Bio/Vote History | ||
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Imran Rasul |
University College London | Bio/Vote History | ||
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Lucrezia Reichlin |
London Business School | Did Not Answer | Bio/Vote History | |
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Ricardo Reis |
London School of Economics | Bio/Vote History | ||
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It can in theory (see link), and some papers have found that it has been the case in the recent past, partly because of mandates imposed by institutional investors.
-see background information here |
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Rafael Repullo |
CEMFI | Bio/Vote History | ||
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Hélène Rey |
London Business School | Did Not Answer | Bio/Vote History | |
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Antoinette Schoar |
MIT | Bio/Vote History | ||
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Kjetil Storesletten |
University of Minnesota | Bio/Vote History | ||
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Daniel Sturm |
London School of Economics | Bio/Vote History | ||
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Silvana Tenreyro |
LSE | Bio/Vote History | ||
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Rick Van der Ploeg |
Oxford | Bio/Vote History | ||
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John Vickers |
Oxford | Bio/Vote History | ||
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Hans-Joachim Voth |
University of Zurich | Bio/Vote History | ||
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Karl Whelan |
University College Dublin | Did Not Answer | Bio/Vote History | |
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Charles Wyplosz |
The Graduate Institute Geneva | Bio/Vote History | ||
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Question C Participant Responses
| Participant | University | Vote | Confidence | Bio/Vote History |
|---|---|---|---|---|
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Franklin Allen |
Imperial College London | Bio/Vote History | ||
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Markets are often very incomplete. If managers focus on other stakeholders in such cases, this can lead to large benefits.
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Pol Antras |
Harvard | Bio/Vote History | ||
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Olivier Blanchard |
Peterson Institute | Bio/Vote History | ||
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Usual distinction between social and private benefits
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Richard William Blundell |
University College London | Bio/Vote History | ||
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Maristella Botticini |
Bocconi | Bio/Vote History | ||
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Agnès Bénassy-Quéré |
Paris School of Economics | Bio/Vote History | ||
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The answer should be in the wording of the question: if firms are managed so as to maximize social welfare, then social welfare should be max. The problem is possible inefficiencies. For instance the fact that managers interact with unions that have a different utility function.
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Elena Carletti |
Bocconi | Did Not Answer | Bio/Vote History | |
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Jean-Pierre Danthine |
Paris School of Economics | Bio/Vote History | ||
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Paul De Grauwe |
LSE | Bio/Vote History | ||
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Jan Eeckhout |
UPF Barcelona | Bio/Vote History | ||
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Xavier Freixas |
Barcelona GSE | Did Not Answer | Bio/Vote History | |
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Nicola Fuchs-Schündeln |
Goethe-Universität Frankfurt | Did Not Answer | Bio/Vote History | |
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Jordi Galí |
Barcelona GSE | Bio/Vote History | ||
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Luis Garicano |
LSE | Did Not Answer | Bio/Vote History | |
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Yuriy Gorodnichenko |
Berkeley | Bio/Vote History | ||
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Rachel Griffith |
University of Manchester | Bio/Vote History | ||
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Veronica Guerrieri |
Chicago Booth | Bio/Vote History | ||
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Luigi Guiso |
Einaudi Institute for Economics and Finance | Bio/Vote History | ||
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Sergei Guriev |
Sciences Po | Bio/Vote History | ||
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Patrick Honohan |
Trinity College Dublin | Bio/Vote History | ||
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As phrased, the proposition excludes greenwashing and related behaviour.
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Beata Javorcik |
University of Oxford | Bio/Vote History | ||
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Jan Pieter Krahnen |
Goethe University Frankfurt | Bio/Vote History | ||
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Taking strong decisions in favor of one group may or may not outweigh the indirect negative consequences (e.g. lower taxes) for other groups. This renders an "net effect assessment" difficult.
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Botond Kőszegi |
Central European University | Bio/Vote History | ||
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Eliana La Ferrara |
Harvard Kennedy | Bio/Vote History | ||
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Christian Leuz |
Chicago Booth | Bio/Vote History | ||
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Firm activities can have (substantial) externalities on other stakeholders and taking these externalities into account (almost by definition) creates substantial social benefits. However, doing so likely also reduces firm profits (on average), so there is a tradeoff.
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Thierry Mayer |
Sciences-Po | Bio/Vote History | ||
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Costas Meghir |
Yale | Bio/Vote History | ||
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Marco Pagano |
Università di Napoli Federico II | Bio/Vote History | ||
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Lubos Pastor |
Chicago Booth | Bio/Vote History | ||
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For some firms, yes, for others, no. The devil is in the details. Managers act in their own interest.
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Richard Portes |
London Business School | Bio/Vote History | ||
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Canice Prendergast |
Chicago Booth | Bio/Vote History | ||
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Carol Propper |
Imperial College London | Bio/Vote History | ||
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Imran Rasul |
University College London | Bio/Vote History | ||
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Lucrezia Reichlin |
London Business School | Did Not Answer | Bio/Vote History | |
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Ricardo Reis |
London School of Economics | Bio/Vote History | ||
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Substantial is too strong, especially given my concerns about principal-agent problems and corporate governance in first question.
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Rafael Repullo |
CEMFI | Bio/Vote History | ||
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Hélène Rey |
London Business School | Did Not Answer | Bio/Vote History | |
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Antoinette Schoar |
MIT | Bio/Vote History | ||
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The answer depends on how these "social and environmental" benefits are measured and monitored. Recent papers suggest that often these actions are attempts to greenwash, which can lead to more harm.
-see background information here |
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Kjetil Storesletten |
University of Minnesota | Bio/Vote History | ||
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Daniel Sturm |
London School of Economics | Bio/Vote History | ||
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Silvana Tenreyro |
LSE | Bio/Vote History | ||
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Rick Van der Ploeg |
Oxford | Bio/Vote History | ||
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John Vickers |
Oxford | Bio/Vote History | ||
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Hans-Joachim Voth |
University of Zurich | Bio/Vote History | ||
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Karl Whelan |
University College Dublin | Did Not Answer | Bio/Vote History | |
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Charles Wyplosz |
The Graduate Institute Geneva | Bio/Vote History | ||
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