Socially Responsible Investing: A Resource Misallocation Disaster in the Making

Mathieu Gomes () and Paul Tice
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Mathieu Gomes: CleRMa - Clermont Recherche Management - ESC Clermont-Ferrand - École Supérieure de Commerce (ESC) - Clermont-Ferrand - UCA [2017-2020] - Université Clermont Auvergne [2017-2020]

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Abstract: Directing capital flows and manipulating firms' capital costs through environmental, social and governance (ESG) mandates leads prices to misstate the relative scarcities of things and the relative values that their users put on them. Basing investment decisions on ESG factors creates financial market distortions; restricts the investable universe for asset managers, pension funds, and insurance companies; and is driving capital away from developed European markets. However well intentioned, Europe's imposition of these policies is likely to be an economic and social failure.

Keywords: SRI - Socially Responsible Investment; Resource allocation problems (search for similar items in EconPapers)
Date: 2026-09-01
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Published in The independent review : a journal of political economy, 2026, 31 (2)

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-05757036

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