A ESG paradigm derived from the Firm/Market paradigm
We see the ESG movement as part and parcel of the growing public expectations around corporate responsibility and our paradigm on ESG based on the ideas of Nobel Laureaute Ronald Coase* and the New Institutional Economics which is really about bringing Economics back to its roots of the Adam Smith days, in our view.
Such paradigm highlights the positive feedbacks companies can reap from investing in ESG and one key aspect of ESG should be the city/ country; the communities/ districts they operate as well as the shareholders/ staff they are facing with which constitutes thee major aspects of “The Market” facing them. As such, apart from global climate and the broader importance of a green and sustainable physical environment, we also see the cities/ countries; districts/ communities; staff/ industry as also constituents of “the Market” faced by companies, whether they are public or private.
* Ronald H. Coase was the 1991 Laureaute of the Nobel Prize in Economics. Coase has arguably opened up a “Pandora Box” in Economics in that he has asked two very profound questions : i) what is the Nature of the Firms and ii) what is the role of property right s and transaction cost in the free market process. It is, however, “pandora box” in quote because the things that are coming out of the box is not entirely evils but also hopes about a much better and sophisticated understanding of how to get the free market to work most effectively. Incidentally, according to the Greek mythology, other than evils, there was also hope inside the original Pandora Box.