Negative Externalities, ESG and Democracy

Let the government set environmental standards and the CEOs follow.

Letter to WSJ.

"Al Gore and David Blood’s op-ed “ESG Investing Is Consistent with Fiduciary Duty” (Nov. 9) includes two examples that highlight the best way to handle externalities, the economic term for costs imposed on others.

According to these examples, dumping toxic waste and using dirty fuels can incur “significant liabilities” or run afoul of government regulations. Indeed, the people, represented by the executive or legislative branch of government, should set the standards, laws and rules regarding at least the “E” for environment in ESG. CEOs must then abide by these directives and be held liable if they don’t. We shouldn’t empower CEOs or investment managers, however, to set priorities, goals and trade-offs for issues that affect us all. That’s the job of our elected officials.

Prof. S. Abraham Ravid

Yeshiva University

New York"