Episode 16
Alex Edmans
Nuance in ESG

Alex Edmans is Professor of Finance at London Business School and Academic Director of the Centre for Corporate Governance. He graduated from Oxford University and then worked for Morgan Stanley in investment banking. Alex has spoken at the World Economic Forum in Davos, testified in the UK Parliament, presented to the World Bank Board of Directors and given multiple TED talks. He has written for the Wall Street Journal, Financial Times and Harvard Business Review. In this episode, Alex discusses insights from his book ‘Grow the Pie’ helping us see more clearly how to make ESG-related tradeoffs in a complex market environment.

Be wary of black and white thinking

A telltale sign that research or analysis is flimsy is the use of sweeping statements. Remember we're more likely to believe something is true if we agree with its conclusion. Be especially careful with black or white statements about ESG if you are personally eager for an insight to be true.

Grow the pie rather than fight over how to slice it

It's easy for business to focus on growing the amount of pie they get by arguing for less regulation and society to argue for more pie by straight jacketing companies with regulation. By focusing on shared benefits i.e., 'growing the pie', companies look for opportunities to create value for society and the company over the long term and therefore align incentives.

Not all tradeoffs are possible for business without regulation

It's ok to reduce profit in the name of long term societal objectives within reason. If the profit sacrifice is too great for shareholders, this is a sign that policy is required so as to not penalise 'pie growing companies'.