Markets vs. Mandates: Session 2: Corporate Responsibility, ESG Investing, and Climate Disclosures | Hoover Institution

Presenters: Sanjai Bhagat, professor of finance at the University of Colorado–Boulder; and John H. Cochrane, Rose-Marie and Jack Anderson Senior Fellow, Hoover Institution.

Chair: John Taylor, George P. Shultz Senior Fellow in Economics, Hoover Institution.

Sanjai Bhagat explained that ESG investing principles and new standards of corporate social responsibility are not based on the fiduciary duty to maximize shareholder value. They are primarily centered, he said, on maintaining the well-being of societal stakeholders, including customers, employers, suppliers, and communities, as well as particular objectives such as environmental justice.

John Cochrane asserted that the Security and Exchange Commission’s plan to enforce ESG investment practices isn’t based on “saving the planet” but on bending corporations to serve a particular political agenda. Echoing Bhagat, Cochrane said the ESG mandates would not maximize shareholder value. It would instead deny capital to companies, lower their asset prices, and curb returns to investors. ESG mandates would also pervert markets, destroy competition, and encourage some companies to rent-seek from the government.

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