Topic: How To Invest

What is Pat’s commentary for the week of August 22, 2023

Article Excerpt

As I’ve often mentioned, the biggest risk you face as an investor is hidden or unrecognized conflicts of interest. It’s not because any one conflict of interest can do great damage to your finances. The risk comes out of the fact that conflicts of interest are everywhere. That’s especially so with ESG (Environmental, Social and Governance) issues. These issues may come with pure motives, but they require outlays that depend on judgment calls rather than financial analysis. Companies deal with these issues by hiring outside consultants and firms to help with decisions. These outsiders supply guidance on how companies should spend their money. The advice they give can raise or lower a company’s profits. This is a potential source of conflicts of interest, for the companies and the consultants. Alex Edmans is a professor of finance at London Business School and author of Grow the Pie: How Great Companies Deliver Both Purpose and Profit. He is widely viewed as an ESG advocate. In an…