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Matt Levine

The SEC Is Asking About ESG

Also executive insider trading and ex-executive trading.

If you invest in an ESG fund—one that tries to invest in companies with good environmental, social and governance practices, and avoid investing in companies with bad ones—should you expect to outperform or underperform the market? There are at least two straightforward but opposite possible answers:

Those are the possible answers for ESG investing in the abstract. But when you do your ESG investing through ESG funds, you get at least one other possible answer, one involving agency costs: