Is ESG a Luxury Good?

11 Pages Posted: 3 May 2024

See all articles by David F. Larcker

David F. Larcker

Stanford Graduate School of Business; Stanford University - Hoover Institution; European Corporate Governance Institute (ECGI)

Amit Seru

Stanford University

Brian Tayan

Stanford University - Graduate School of Business

Date Written: May 3, 2024

Abstract

In this Closer Look, we consider whether ESG is a luxury good—a good whose high price tag stimulates demand. During times of economic prosperity, shareholders expressed willingness to sacrifice personal financial benefit to see environmental and social objectives advanced, but in times of adversity, their willingness to suffer personal financial loss in support of ESG has collapsed. We ask:

• Is ESG a luxury good, or a basic necessity?
• Is the current change in investor sentiment permanent, or will it rebound when economic conditions improve?
• What are the implications for boards of directors? Which stakeholder initiatives are “must haves” and which are “nice to haves”?
• What stakeholder investments should be retained through the cycle, and which should be dependent on economic conditions?

Keywords: ESG, shareholders, investors, board of directors, stakeholders

Suggested Citation

Larcker, David F. and Seru, Amit and Tayan, Brian, Is ESG a Luxury Good? (May 3, 2024). Rock Center for Corporate Governance at Stanford University Working Paper Forthcoming, Available at SSRN: https://ssrn.com/abstract=4816562

David F. Larcker (Contact Author)

Stanford Graduate School of Business ( email )

Graduate School of Business
518 Memorial Way
Stanford, CA 94305-5015
United States
650-725-6159 (Phone)

Stanford University - Hoover Institution ( email )

Stanford, CA 94305
United States

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Amit Seru

Stanford University ( email )

Stanford, CA 94305
United States

Brian Tayan

Stanford University - Graduate School of Business ( email )

655 Knight Way
Stanford, CA 94305-5015
United States

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