Justice Everywhere

a blog about philosophy in public affairs

Category: Governance (Page 1 of 9)

Fiduciary duties of pension fund managers in the anthropocene

The latest report by the International Panel on Climate Change (IPCC) estimates that hundreds of billions of dollars will be required for climate mitigation and adaptation investments per year to avoid catastrophic global warming. Yet, some of our financial practices are not only slow to adapt to this requirement, but actually represent an obstacle in achieving the goal.

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Is Ethics Really Good for Business?

ESG investing – Adobe Stock

Each year when fall comes, I teach finance ethics to bright new postgraduate students in finance. After introducing ethical investing – i.e. the practice of integrating ethical criteria such as environmental, social, and governance performance (ESG) in investment decisions – I ask them a question: “Who believes that ESG investing generates higher financial returns?”

This year, about half of them raised their hand. This is unsurprising, given how widespread this belief is in business. The Davos Manifesto (2020) now claims that business “performance must be measured not only on the returns to shareholders, but also on how it achieves its environmental, social and good governance objectives”. To convince investors and businesses, advocates often claim that integrating ESG criteria in investment or business decisions can reduce (long-term) risks and generate higher returns. Slightly caricaturing, a vegan restaurant chain in Canada faces lower regulatory, reputational, and environmental risks than a corrupt and polluting mining company in a politically unstable country (see examples here).

Case in point, Laurence Fink, CEO of BlackRock (a $6 trillion investment firm), sends an annual letter to the C.E.O.s of companies it invests in asking them to serve a social purpose because for him, “profits and purpose are inextricably linked” (2019). McKinsey Quarterly also published an article outlining “five ways that ESG creates value” (2019). Market actors seem to have noticed, because S&P500 companies increasingly mention ESG in quarterly earning calls and the worldwide ESG assets under management have grown to $2.72 trillion in 2021.

No empirical evidence

The first problem is that there is no solid empirical evidence demonstrating a systematic link between ethical behavior and higher profits, as long-time critics underline (Vogel 2006). Most recently, The Economist offered a damning account: “ESG has become a gravy train for the investment industry… In marketing, they claim that ESG funds outperform mainstream ones, even if this does not stand up… empirically.” Indeed, if ethical businesses were more profitable, ESG-focused investment funds would be expected to consistently outperform standard funds ignoring ESG, but this has not been the case empirically (Vogel 2006, The Economist 2022).

Take a recent study by McKinsey (2018) claiming to demonstrate that “gender and ethnic diversity are clearly correlated with profitability”. In fact, the study merely shows that companies in the top quartile for gender or ethnic diversity on their executive teams are 15-35% more likely to outperform the national industry median in profitability than companies in the fourth quartile. But there are a few problems with this result.

Assuming agreement on the method to measure diversity (vague, inconsistent, or self-serving measurement of ESG performance plagues the industry), the results do not demonstrate that diversity causes financial performance. Instead, businesses that are already financially healthy may simply have more spare money to monitor and invest in ESG objectives such as improving diversity. As the study itself admits: “correlation does not demonstrate causality”.

Moreover, McKinsey’s study does not show that diverse firms are more performant than non-diverse ones, it shows that they are more likely to outperform the national industry median. This result is compatible with a world in which some businesses in the bottom diversity quartile outperform the industry median while some diverse businesses underperform. More generally, despite anecdotal, company-specific examples where ethical strategies have delivered financial returns, ESG objectives can fail to pay off and bad practices can still deliver high profits (Vogel 2006).

Missing the ethical point

Even if one concedes that ethical behavior is not systematically linked to higher profitability, but merely claims that they do not always conflict, this is missing the ethical point. Business leaders and investors should care about environmental protection, diversity, or fraud prevention because it’s the right thing to do, not because it is good for business.

One issue if businesses only valued ESG objectives strategically is that market incentives are structured to encourage these objectives only up to the point necessary to reach strategic goals, not further. They would stop investing in environmental protection, social responsibility, and good governance as soon as it stops being profitable, which would lead to watered-down ambitions (The Economist 2022).

This means that there is always a point where ESG objectives and profitability are in conflict. Sweeping such conflicts under the rug by focusing on cases where they align omits the hard but important question that business leaders and investors must ask themselves: are there cases where they must sacrifice profitability to respect their ethical obligations?

A convenient belief

Conflicts between our own values are uncomfortable. They impose difficult trade-offs that we, or the people around us, may find controversial. When our personal gain conflicts with our social values, it can also reveal selfish tendencies in ourselves that we prefer to ignore. Observing discrepancies between the values we affirm and the actual choices we make can lead to cognitive dissonance. This is perhaps one reason why it is so tempting to believe that ethical behavior is also good for business: it would be so much easier if it was! We engage in motivated reasoning: we believe that ethics is good for business because we want to believe it.

Business ethicists may also be partly responsible for this belief’s popularity (Vogel 2006). In the urge to encourage best practices, it is tempting to take the path of least resistance: the easiest way to convince business leaders to pursue ESG objectives is to tell them it is profitable.

But the time has come to be honest. There are specific cases in which ESG objectives can be strategically useful but this is not always true and it provides a poor reason to adpot better business practices. While market competition can be beneficial (it lowers prices and drives innovation), it often limits businesses’ capacity to pursue ESG objectives. This is why business incentives are insufficient to motivate best practices and why David Vogel concludes that “governments remain essential to improving corporate behavior” (Vogel 2006).

Factory farm abolition the moderate way

This guest post is written by Ben Sachs-Cobbe. Ben has recently published a book entitled Contractarianism, Role Obligations, and Political Morality exploring the connection between foundational questions in political philosophy and important issues in public policy, including the political and legal status of sentient animals.

Factory farms inflict suffering on the animals they produce. At a young age animals are torn away from their mothers and mutilated to prevent them hurting themselves and others; they’re then kept in squalid conditions with their movement and access to the outdoors restricted while they grow at a dangerously fast rate; before they’re finally killed by a machine after a mercifully brief life. Estimates of the number of farmed animals produced for food worldwide each year range from 50-70 billion (not including fish), with anything from two-thirds to 90% of those being factory farmed. This is misery on an almost incomprehensible scale.

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From the Vault: Philosophy in the Covid-19 Pandemic

While Justice Everywhere takes a short break over the summer, we recall some of the highlights from our 2021-22 season. 

 

A lot has been written about Covid-19 and Justice Everywhere has contributed to this on several fronts. Here are some links from the last year on philosophical  issues raised by the pandemic that you may have missed or be interested to re-read:

Stay tuned for even more on this topic in our 2022-23 season!

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Justice Everywhere will return in full swing on 1st September with fresh weekly posts by our cooperative of regular authors (published on Mondays), in addition to our Journal of Applied Philosophy series (published on Thursdays). If you have a suggestion for a topic or would like to contribute a guest post on a topical subject in political philosophy (broadly construed), please feel free to get in touch with us at justice.everywhere.blog@gmail.com.

From the Vault: Journal of Applied Philosophy Collaboration

While Justice Everywhere takes a short break over the summer, we recall some of the highlights from our 2021-22 season. This post focuses on our ongoing collaboration with the Journal of Applied Philosophy.

 

In 2019, Justice Everywhere began a collaboration with the Journal of Applied Philosophy. The journal is a unique forum that publishes philosophical analysis of problems of practical concern, and several of its authors post accessible summaries of their work on Justice Everywhere. These posts draw on diverse theoretical viewpoints and bring them to bear on a broad spectrum of issues, ranging from the environment and natural resources to freedom, empathy, and medical ethics.

For a full list of these posts, visit the JOAP page on Justice Everywhere. For a flavour of the range, you might read:

Stay tuned for even more from JOAP authors in our 2022-23 season!

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Justice Everywhere will return in full swing on 1st September with fresh weekly posts by our cooperative of regular authors (published on Mondays), in addition to our Journal of Applied Philosophy series (published on Thursdays). If you have a suggestion for a topic or would like to contribute a guest post on a topical subject in political philosophy (broadly construed), please feel free to get in touch with us at justice.everywhere.blog@gmail.com.

Towards a feminist city

Historically, men and women have experienced the city in a drastically different way. Cities were built not for women, but for and by men. This male dominance in urban planning brought about hetero-patriarchal norms, which are based either on women remaining quiet in the private spaces or – if they access urban spaces – relying on the urban structure created by men. The persistence of those urban spaces creates barriers for women accessing transport, land and constrains their social activity and agency needed to exercise their political voice. This is the characterisation of an oppressive and non-egalitarian city in terms of the division of power and resources.

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Why should we protect the vulnerable?

In this post, Emma Curran & Stephen John discuss their recent article in Journal of Applied Philosophy on duties to prioritise vaccinating the vulnerable.


In the December of 2020, the UK seemed to breathe an, albeit small, sigh of relief as the first COVID-19 vaccinations were administered. After almost nine months of lockdowns, the vaccine roll-out was the first concrete sign that life might return to – at least something like – normality. Indeed, throughout 2020, the promise of a vaccine seemed to be the end to which lockdown pointed. Lockdown was tough but necessary to protect the lives of those most vulnerable to COVID-19, until they could be helped by a vaccine. Unsurprisingly, then, the vaccine roll-out started with the most vulnerable, with a primary focus on age. In this post, however, we explore a  seemingly small alteration to the Government’s vaccine strategy which concerned and confused many. Using this policy, we explore the reasons we have to protect the vulnerable, the complexity of ethical discourse around the distribution of vaccines, and the need for transparent, open debate.

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Allowing fossil-fuel advertising is harmful and irresponsible

John Kenneth Galbraith, in his classic The Affluent Society (1952) formulated a powerful argument he called the “dependence effect.” In a nutshell, the idea is that capitalist societies create wants in individuals in order to then satisfy them. Perhaps the central tool in this process is advertising. Galbraith suggested that the additional wants generated through advertising might not even lead to additional welfare. People’s level of preference satisfaction before being exposed to advertising can be just as high as after the exposure. Viewed from his angle, advertising is wasteful from a societal perspective, because the costs involved do not generate any tangible benefits. The reason firms engage in it is solely to secure more market share than their competitors.

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Are Persons with Intellectual Disabilities Unjustly Disenfranchised?

In July 2020 the Romanian Constitutional Court declared that the institution of judicial interdiction, which deprived people deemed to have severe intellectual disabilities[1] of numerous civil rights, is unconstitutional. Thus, while the Constitution itself still requires that people with intellectual disabilities placed under judicial interdiction are to be disenfranchised, the provision is de facto inapplicable, making the next round of elections the first in Romania’s history where people with severe intellectual disabilities will be included in the demos. Other countries have more explicitly embraced this type of enfranchisement, with both France and Spain making legislative changes that grant voting rights to people with intellectual disabilities in 2018. Consequently, about half of EU Member States now endorse the electoral exclusion of people with intellectual disabilities, in some form, while the other half fully include them. At a global level, the situation is starkly different, however, with a 2016 study on all 193 UN countries showing that only 11% had provided full enfranchisement up to that point. Thus, it can be said that as of 2022, only a small minority of states abide by Article 29 of the Convention on the Rights of Persons with Disabilities, according to which states should “ensure that persons with disabilities can effectively and fully participate in political and public life on an equal basis with others, directly or through freely chosen representatives, including the right and opportunity for persons with disabilities to vote […]”.

Of course, the normative force of arguments for or against any form of disenfranchisement cannot be primarily derived from the provisions of international law. And, in fact, even from this perspective any judgement would not be so clear-cut, considering the recent decision by the European Court of Human Rights to uphold the practice of disenfranchisement for reasons of intellectual capacity as legitimate in the case of Strøbye and Rosenlind v. Denmark. So what can be said in justification of this policy?

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The EU needs to be able to Expel Autocratic Members

This is a guest post by Tom Theuns, Assistant Professor of Political Theory and European Politics at Leiden University (tweeting @TomTheuns). It discusses his recent work on how the EU should handle member states that violate democratic values


The democracy and rule of law crisis in the EU has now lasted over a decade. One of the problems has been that the main instrument for responding to democratic backsliding in a member state, the infamous Article 7 (A7) of the Treaty on European Union (TEU), is ineffective. Given that the two states most active in dismantling democracy in Europe—Poland and Hungary—have pledged to support one another, A7 is crippled by a unanimity requirement.

A7 is supposed to sanction violations of the fundamental values of the EU listed in Article 2 TEU. These include democracy, the rule of law and equality. The sanction in A7 is the disenfranchisement of a backslidden state in the Council of the EU. In a recent article, I argue that A7 is not only ineffective but also normatively incoherent. Instead of disenfranchisement, I think the final sanction for democratic backsliding should be expulsion from the EU.

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