Linking ESG scenarios to real economy outcomes

Michael Sheren

I was very pleased when asked to provide the Foreword to this important book on how environmental, social and governance (ESG) factors are fast becoming the most critical considerations in 21st Century investing. The risks, opportunities and trade-offs presented by ESG strategies, approaches and tactics are unprecedented; further, the speed and the breadth in which ESG is penetrating investment decision-making is unmatched. That said, there is still much to do to mainstream ESG analysis. That is why I believe this book, authored by a wide array of highly experienced academics, market participants and industry stakeholders, is essential reading for experienced and entry-level financial professionals alike.

Most investment professionals are aware of the risks associated with the environmental pillar of ESG. Environmental laws have been around since the 1960s. The risks to investment cashflows associated with water and air pollution, asbestos, plastics and soil contamination have grown steadily over the years. Remediation, liability risk and cost to capital, and share price performance associated with these once free-riding negative externalities has increased markedly. Even now

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