Tuesday, February 20, 2024

Deterrence in Merger Review: Likely Impacts of Recent U.S. Policy Changes

Luke M. Froeb Vanderbilt University - Owen Graduate School of Management 

 Steven Tschantz Vanderbilt University - Department of Mathematics 

 Gregory J. Werden Independent; George Mason University - Mercatus Center 

 Date Written: January 30, 2024 

We model deterrence in a multistage merger review process, potentially ending in a court proceeding. Potential merging parties sequentially decide whether to begin the process, and whether to proceed to the next stage, in the face of uncertainty about what the enforcement agency or court will do. The model is designed to explore the complex impacts of policy changes in a costly regulatory process subject to uncertainty, and in particular to elucidate the likely impact of policy changes by the two U.S. enforcement agencies. The model shows why those policy changes can be expected to succeed in deterring bad mergers but at the cost of deterring a greater number of good mergers. 

 Keywords: mergers, deterrence, antitrust, regulation 

 JEL Classification: K22, L10, L40, L50 

Froeb, Luke M. and Tschantz, Steven T. and Werden, Gregory J., Deterrence in Merger Review: Likely Impacts of Recent U.S. Policy Changes (January 30, 2024). 

Available at SSRN: https://ssrn.com/abstract=4709897 or http://dx.doi.org/10.2139/ssrn.4709897

Deterrence in Merger Review: Likely Impacts of Recent U.S. Policy Changes

Deterrence in Merger Review: Likely Impacts of Recent U.S. Policy Changes 10 Pages Posted: 21 Feb 2024 Luke M. Froeb Vanderbilt University - Owen Graduate School of Management Steven Tschantz Vanderbilt University - Department of Mathematics Gregory J. Werden Independent; George Mason University - Mercatus Center Date Written: January 30, 2024 Abstract We model deterrence in a multistage merger review process, potentially ending in a court proceeding. Potential merging parties sequentially decide whether to begin the process, and whether to proceed to the next stage, in the face of uncertainty about what the enforcement agency or court will do. The model is designed to explore the complex impacts of policy changes in a costly regulatory process subject to uncertainty, and in particular to elucidate the likely impact of policy changes by the two U.S. enforcement agencies. The model shows why those policy changes can be expected to succeed in deterring bad mergers but at the cost of deterring a greater number of good mergers. Keywords: mergers, deterrence, antitrust, regulation JEL Classification: K22, L10, L40, L50 Suggested Citation: Froeb, Luke M. and Tschantz, Steven T. and Werden, Gregory J., Deterrence in Merger Review: Likely Impacts of Recent U.S. Policy Changes (January 30, 2024). Available at SSRN: https://ssrn.com/abstract=4709897 or http://dx.doi.org/10.2139/ssrn.4709897

Is ESG investing illegal?

For fund managers, it may violate their fiduciary responsibility (to maximize returns) to their shareholders.   Apparently, the legal risk is too big for JP Morgan, State Street, and BlackRock:  
Asset managers have been walking a fine legal line. GOP Attorneys General in 2022 warned that they might be violating their fiduciary obligations and antitrust laws. House Judiciary Committee Chairman Jim Jordan in December subpoenaed BlackRock and State Street Global Advisors for documents and communications related to their involvement in “collusive” agreements.
The climate alliance’s new rules would compound the legal and political jeopardy. In its withdrawal announcement, State Street said its rules “are not consistent with our independent approach to proxy voting and portfolio company engagement.” BlackRock said the rules “would raise legal considerations.”

Peter Theil's (successful Venture Capitalist) Harvard Talk, "The Diversity Myth"

 Wide ranging, mostly libertarian critique of political and economic trends in the US that touches on Chapter 1 (Incentive Alignment), Chapter 2 (Wealth Creation), and Chapter 3 (Benefit-Cost Analysis).  

  • Proponents of "diversity" don't define the term, which gives Diversity Workers remarkable freedom to claim that whatever they are doing furthers the goal.  
    • In-class question: how would you align the incentives of Diversity Workers with the goal of diversity?
  • Positive correlation between wealth creation and inequality in the past few decades:  Theil offers his take, but does not addresses the idea that incentive alignment creates inequality, as it rewards prescient, lucky, more productive, or harder workers.
    • In-class question: does incentive alignment cause inequality? 
  • Justification by President Obama that his increased income taxes would cause people to work harder to make up for the lost income ("income effect") rather than substituting to more leisure/less work ("substitution effect").  
    • In-class question: do higher income taxes lead to more or less work?  
    • [Comment: politically, to get a policy implemented, you have to ignore any tradeoffs that might go along with it.  Economists are trained to point these out, called "unintended consequences" or "hidden costs."]
    • In-class question: how would you align the incentives of venture capitalists with the goal of innovation?  HINT:  low probability of a big payoff.
  • Guilty Pleasure: comparison of Senator Elizabeth Warren to a fundamentalist Protestant preacher in her lack of forgiveness or redemption. 

Sunday, February 18, 2024

Don't define the problem as the lack of your solution (gun control)

The latest example comes from NPR's coverage of the shooting at the Kansas City Super bowl Parade.
That the characterization of this incident as being reflective of “weak gun laws” is ridiculous. ...Every single thing that happened here was already illegal. It is illegal for juveniles to possess handguns. It is illegal for them to carry those handguns. It is illegal for them to shoot at each other in a public place. ...
... its coverage of gun-related crime, ... is invariably marked out by a fanatical obsession with gun-control and a total lack of interest in anything else.

Don't define the problem as the lack of your solution because it locks you into a particular solution, without the careful analysis that benefit-cost analysis requires.  


Saturday, February 17, 2024

Four Myths about Price Discrimination

In an earlier post, Soda Prices are Too Low for the FTC, the Biden Administration seems to be trying to turn back the clock to a time when price discrimination was viewed as bad.  Lest we repeat the mistakes of the past, it is worthwhile to remember its lessons.   

 See this 2003 talk by some middling FTC economists. Here the conclusions:  


BOTTOM LINE:  Determining the role that price discrimination plays in antitrust enforcement typically requires the kind of difficult and time consuming economic analysis the Biden administration is trying to avoid.
Cooper, James C. and Froeb, Luke M. and O'Brien, Daniel P. and Tschantz, Steven T., Does Price Discrimination Intensify Competition? Implications for Antitrust (2005). Antitrust Law Journal, Vol. 72, No. 2, pp. 327-373, 2005, George Mason Law & Economics Research Paper No. 14-30, Available at SSRN: https://ssrn.com/abstract=2470135
Werden, Gregory J. and Froeb, Luke M., Can the FTC Turn Back the Clock? (August 15, 2021). Antitrust Magazine Online, Oct. 2021, Available at SSRN: https://ssrn.com/abstract=3909851

Thursday, February 15, 2024

The Hidden Costs of Streaking the Super Bowl

Two "streakers" interrupted the 2024 Super Bowl to attract social media followers. For the most part, this would be considered a harmless stunt.But what are the hidden costs? Most of these would be the costs to those of us watching. Only those in the stadium actually saw the stunt. TV viewers might have been more affected. Suppose it delayed the game some 5 seconds. With viewership of 123.7 million, this represents almost 20 person-years lost or, perhaps, $0.5 million in value of time lost. Perhaps we are not doing enough to deter disruptions.

Soda Prices are Too Low for the FTC

The FTC is investigating Coke and Pepsi for price discriminating. It has invoked the Robinson-Patman Act, otherwise known as the "Mom & Pop Protectionism Act." Most economists consider the act itself to stifle competition and innovation by restricting supply chain decisions. The legal profession also came around to this view such that the number of cases dwindled to zero. But, evidently, it is not dead yet.

The law, known as the Robinson-Patman Act, bars manufacturers from charging different prices to competing resellers of their products if the practice threatens to harm competition. The law is highly technical and hasn’t been enforced by the FTC in decades (emphasis added).

I can hear Dr. Frankenstein yelling, "It's alive! It's ALIVE!!!"

Wednesday, February 14, 2024

Demand for electric cars crashed last summer, supply is slow to adjust

  From WSJ:  
The wave of early EV adopters willing to splurge had receded, and the next round of potential customers was proving more hesitant. They had more questions about how far a car could go on a single charge, and the life expectancy of batteries. They worried about charging times, repair costs, and not having enough places to plug in, according to dealers and surveys.

With excess supply (measured as months of supply, one would expect the price to keep falling, until (Quantity Demanded)=(Quantity Supplied).

Tuesday, February 13, 2024

California and Washington commit the Hidden-Cost Fallacy

From MarginalRevolution: the increase in California's income tax "increased total tax revenue for California — but not nearly as much as intended. Due to departures, the state lost more than 45% of its windfall tax revenues from the policy change, and within two years the state lost more than 60% of those same revenues."

This illustrates the main idea of Chapter Three: 

Consider all costs and benefits that vary with the consequence of a decision [if you miss some that is the hidden-cost fallacy]; but only costs and benefits that vary with the consequence of a decision [if you consider irrelevant ones that is the sunk-cost fallacy].
It looks as if Washington State is making the same mistake: In 2022 they imposed a new, 7% capital gains tax on sales of stocks or bonds of more than $250,000. Soon thereafter, the state's richest man moved to Florida. 

 BOTTOM LINE: People respond to incentives [Chapter One], so make sure your state legislators read Chapter Three.

Monday, February 12, 2024

Are stocks over-valued?

 DISCLAIMER:  If I really knew, I would not be teaching school.

WSJ summarizes five valuation methodologies:

  • Price/Earnings Ratio:  "Analysts are more optimistic about the profit picture for this year and project that earnings among the companies in the S&P 500 will rise roughly 11%. That could offer stocks more room to run."
  • Price-to-book Ratio: "Akin to the price/earnings ratio, the price-to-book ratio divides a company’s stock price by its book value, a measure of total assets minus liabilities. ... It is less useful for tech companies because their growth prospects often aren’t captured on company balance sheets...The S&P 500 is trading at a forward price-to-book ratio of 4.15, above its 10-year average of 3.26 and its 20-year average of 2.76. In comparison, Nvidia’s price-to-book ratio is 22.48."
  • Equity Risk Premium: "Comparing the trailing earnings yield with the 10-year Treasury yield shows that the S&P 500’s equity risk premium is at 0.7 percentage point, near the lowest level in about two decades. (The lower the ratio is, the more expensive stocks are.)"
  • Price/Earnings Growth Ratio: "The PEG ratio is the market’s valuation of a company relative to its earnings prospects. To calculate it, divide a company’s price/earnings ratio over the past 12 months by its projected annual future earnings growth. A PEG of 1 indicates the stock’s price is in line with its growth expectations. ... The S&P 500’s current PEG ratio is 1.48, below its 10-year average of 1.49 and above its 20-year average of 1.35. Nvidia’s ratio of 0.78 makes it look cheap in comparison."
  • CAPE: "At 33.4, the S&P 500’s CAPE ratio is higher than it has been more than 96% of the time since 1881, but it is still well below the prior peaks seen in the late 1990s and 2021."

We knew rent control was bad, but ...

 did not know that it could cause a financial crisis:

..what worries investors more is the NYCB’s $37 billion multi-family housing portfolio, about half of which are comprised of New York rent-regulated units.
...Why have these loans become toxic?
Blame Democrats in Albany, who in 2019 restricted landlords’ ability to raise rents to pay for renovations and “de-regulate” rent-stabilized units. ... One result is that landlords have removed rent-regulated apartments from the market and are leaving them vacant rather than spend on maintenance and improvements that they can’t recoup .... Lower anticipated future rents have also slashed property values. ... NYCB’s rent-regulated portfolio could be a ticking time bomb.

And ironically, 

Tighter supply [in the rent controlled market] has pushed up rents in the non-regulated market—one reason Manhattan’s average market-rate monthly rent has surged 30% over the last two years. 

Thursday, February 8, 2024

Podcast about my Favorite Book

I was interviewed about the book on the Million Dollar Stories Podcast. It was a lot of fun but, even though I made a few mistakes (sorry Brian "Shor" McCann and my favorite word appears to be "uh").

Wednesday, February 7, 2024

Can Millennials Afford Houses?

I see commentary every so often about younger generations not being able to afford the houses like their parents, or grandparents, bought decades ago. These often have a generational warfare tinge to them - "Boomers destroyed the economy and now I have to live in a shack." Even after adjusting for inflation, house prices doubled between 1970 and 2020. But there have been plenty of improvements in the quality of the housing stock making new homes not comparable to parents' houses.

By today's standards Boomers' houses sucked. In 1970, one-in-six US houses had no plumbing and did not have access to public water supply, most of these relied on adjacent well water. Waste water for one-in-four houses was not connected to municipal sewage but used a septic tank or a cesspool. Heating for over a quarter was from room heaters or stoves. Three-quarters had no air conditioning. Washers were in 60% but dryers were in only 40%. These are the measures that the US Census tracked. But we also know from updated building codes that they could not handle as many electric appliances and could not withstand extreme weather as well. 

The clearest sign of progress is how crowded they were. Over the fifty years from 1970 to 2020 square footage increased 70% while the number of people living in the house fell 20%. The available data allow us to track the cost per square foot per person.

Real housing prices double (green line) but so does area per person (blue line) resulting in a nearly constant cost per area per person (red line). I infer that housing costs have not risen but housing amenities have. You could afford your grandparents' house but you probably could not find it anymore, and you probably would not want to live in it.

Monday, February 5, 2024

Apocryphal management story

When the CEO left the company, he gave his successor three envelopes to open when she encountered challenging problems.

When she ran into trouble the first time, she opened the first envelope and it said to “blame your predecessor.” She did, and the trouble passed.

When she ran into trouble again, she opened the second envelope and it said “Reorganize.” She did, and the trouble passed.

When it happened once again, she opened the last envelope and it said “Prepare three new envelopes.” 

Saturday, February 3, 2024

Why restrict US exports of natural gas?

 The answer, of course, is politics:

To stop the war in Ukraine from disrupting energy markets, [Biden's] administration has overseen a big expansion in domestic fossil-fuel output. As well as being the world’s top LNG [liquified natural gas] exporter, America continues to be the biggest oil producer. That angers the climate-anxious left wing of Mr Biden’s Democratic Party. ...
But US restrictions wont help:
...the impact of the pause on global markets—and thus on global emissions, which is what matters to the climate—will be minimal. Forgone American exports will be offset by fresh supplies from Qatar, Australia and elsewhere. “I think there is an opportunity,” declared Jonathan Wilkinson, Canada’s energy minister, on January 30th.
BOTTOM LINE: President Biden's virtue signaling is worse than empty, as it is harming US producers by shifting US production to Qatar, Australia, and Canada. 

Wednesday, January 31, 2024

Jan 31 - Hug An Economist Day

A much undeserved constituency finally gets some love. ;-)

Hug An Economist Day

The U.S. celebrates Hug An Economist Day on January 31 each year. Now, it’s obvious this day was meant to show your affection for economists, but we like to think it also encourages us to learn more about economics and how it affects us. Unfortunately, we don’t know much more about this day, like who initiated these celebrations or when they began. For now, this might be an unofficial holiday, but we urge you to celebrate officially and with gusto! If you’re interested in becoming an economist and pursing a degree in business, check out these business scholarships.

Hug An Economist Day Activities

  1. Hug an economist

    We only recommend this with economists you really know (and are close to). If you are lucky enough to count an economist among your loved ones, go on and give them a huge hug to show your appreciation for all they do.

  2. Celebrate the profession and the field

    Host an economics-themed party. Design little dollar-shaped cupcakes, dress up as famous economists, and even play economics-themed games. Monopoly, anyone?

  3. Learn about economics

    Economics is used in conjunction with several other fields, including business, marketing, education, and even the environment. There are plenty of resources that make learning new economic theories and concepts fun — check out videos, presentations, and even Pinterest for ways to learn and remember new information about this field.


Saturday, January 27, 2024

Economics of Lawsuits

The Planet Money folks did an episode on the Telephone Consumer Protection Act (TCPA) to combat spam callers. It allows spamees to sue for $500 per unwanted call. This has made it worth while for some people to actually sue and some have received sizable settlements. Defendants claim that it over deters because some people have made suing under the TCPA a business. Toward the end of the show the hosts have a pretty good sum up that describes the incentives for both parties.

HOROWITZ-GHAZI: The TCPA has turned telemarketing enforcement into a kind of market. Like, instead of having a central government agency deciding this is how much law enforcement we're going to have, the amount of enforcement goes up or down depending on the incentives. How easy is it to hunt down a company making illegal calls? How much does it cost to bring them to justice? Can you find efficiencies of scale by bringing lawsuits on behalf of millions of people all at once?

GUO: And, of course, as with any enforcement regime, the lawbreakers are also weighing their costs and benefits. Telemarketing is a multibillion-dollar business. How much can a telemarketer make on each call? How much financial risk is worth taking on to sell some vacation packages over the phone?

Incentives matter.

Thursday, January 25, 2024

Does inequality make us rich?

The theory is right out of Chapters 1 and 2: incentive alignment means that those who create more wealth earn more.  

Evidence comes from the Great Depression (link):
Roughly four-fifths of the “golden age” of equality (between 1950 and 1980) owed to the Great Depression, not tax policy. This finding is hard to celebrate because it means that greater equality was achieved while everyone was getting poorer.

Evidence also comes from the decline in life-span inequality: as lifespans grow, inequality between residents of a country declines.  

Wednesday, January 24, 2024

Incentive alignment in Benefits Corporations

Begun in Maryland in 2012, thirty states now have Public Benefits Corporations (B-corp's) (wikipedia, seeking alpha, quora

  • For-profit companies that can be publicly traded, but which follow other goals, like ESG. 
  • B-corp managers get legal protection from shareholder suits based on low profitability, as they can claim they are pursuing ESG goals.
Chapter one identifies their fatal flaw: not only is ESG hard to measure, but it also conflicts with the pursuit of profit.  This is similar to the problems created by balanced scorecards.

Without good performance metrics,  it is hard for shareholders to tell if B-corp managers are doing a good job, so managers will pursue their own goals at shareholder expense.

Related:  ESG blog posts

US Fertility rates are below replacement (2.1)

 From MarginalRevolution:

Tuesday, January 23, 2024

Smoothing the Incentives of Patent Examiners

How do you address employees gaming a production quota system? In 2011, the US PTO went from patent examiners having a bi-weekly quota system to adding bonuses tied to eliminating pending examinations on a daily basis. In "Deadlines Versus Continuous Incentives: Evidence from the Patent Office," Frakes and Wasserman examine how patent examiners responded to the new incentives to "clear the inbox." Instead of completing of assignments just before deadlines, there was  a near complete smoothing of task completion ...

leading to large reductions in average examination pendency while resulting in no corresponding reductions in the accuracy of examinations.

This is analogous to "Budget Games: Paying People to Lie" in chapter 22 in which workers have incentives to just meet budget goals. The solution, as the US PTO experience demonstrates, is to find ways to make incentives more linear and less lumpy.

Should we tax the rich more than we already do?

WSJ says "no" for two reasons: 

First, our income taxes are already the most progressive in the OECD, and by increasing the income tax rate, we also increase the incentive to avoid paying it, so it would not raise tax revenue by very much.  
America’s top tax rates often exceed international norms. Our top income-tax bracket of 43.7%—including typical state taxes—exceeds that of the standard OECD nation (40.4%). Our top capital-gains tax rate is 10 points above the OECD average, and our corporate tax rate exceeds not only the OECD mean but that of every Scandinavian nation. America’s effective corporate tax rate is also above average, as are its estate and inheritance taxes.
Second, as we know from Chapter 2, taxes destroy wealth by discouraging wealth-creating transactions, so if we tax income, we get less of it.  This also reduces the amount of money that an income tax would raise. 

 So, what should we do? 

 First, get our spending in line with our income. In the graph below, we see that are spending 8% more than we are making.

Failing that, we can raise more money with a low rate, broad-based consumption tax, like a VAT.  

Politically, we could probably "sell" a consumption tax if we also promised to reduce income tax. But this would be opposed by the left because consumption taxes are not as progressive as income taxes.  Likewise, those on the right would be skeptical because consumption taxes are so good at raising money that they have been used by EU countries to expand the scope of government.  As the late PJ O'Rourke wrote, "Giving money and power to government is like giving whiskey and car keys to teenage boys."  

Thursday, January 18, 2024

Apartments vs. Single Family

Housing is good for illustrating the market forces of chapter 8 because everyone has housing and, due to construction lags and the durability of housing (30 years), market adjusts slowly to equilibrium.

In the graph above from Calculated Risk, we see single family housing starts increasing (RED), but apartments (BLUE) decreasing.  The market is adjusting to the high prices for single family by building new supply; and to the expected low future prices for apartments due to the big supply of apartments under construction due to come to market this year and next by reducing new supply.

SINGLE FAMILY HOMES (RED LINE): "...The weakness in 2022 and early 2023 was in single family starts. However, single family starts have now picked up, helped by limited existing home inventory."

APARTMENTS (BLUE LINE): "...we should see ongoing weakness in [apts] based on less household formation, falling asking rents, rising vacancies, and tighter lending. ... A near record number of multi-family housing units are currently under construction due to construction delays. This suggests a large number of multi-family housing units will be delivered in 2024."

Thursday, January 11, 2024

Are Things Really that Bad?

Binsbergen, Bryzgalova, Mukhopadhyay, and Sharma develop an index of economic sentiment for the US (and individual states) from accumulated news reports. They use a historical collection of 170 years of digitized newspapers, which includes the text of 200 million newspaper pages from 13,000 local newspapers, collecting instances of a bunch of keywords like "profitable", "success", "opportunity" versus "failure", "insolvent", or "unsuccessful". It turns out it predicts economic activity quite well.







However, the authors also note that sentiment trends downward significantly over the past four, and especially two, decades. My colleagues doubted me when I had claimed that the news presented an increasingly bleak picture. It is nice to know I am not crazy. I suspect this reporting of poor sentiment influences public perceptions.Most laymen I come across think that each decade has a worse economy.

This despite all of the evidence to the contrary. Almost all trends in well-being over this period are positive. This period saw increases in income, innovation, leisure time, life expectancy, food choices, a cleaner environment, literacy, entertainment, tourism - you name it. Moreover, there is every reason to believe these trends will continue. I am confident that my grandchildren's lives will be amazing compared to mine. But that is because my profession puts more stock in the data than the news reports. I hope my grandchildren will do the same.

Wednesday, January 10, 2024

A Victory Parade is in Order!

Sixty years ago, LBJ declared "War on Poverty." The results are in and poverty in the US has mostly been vanquished. New research in the prestigious Journal of Political Economy points out that the official poverty rate is hugely biased upward. The authors compare this to a measures of the "Absolute Full-Income Poverty" level that includes various cash transfer programs, adjusts for inflation, and adjusts for changes in consumption bundles. All tolled, the poverty rate fell from 19.5% in 1963 to 1.6% in 2019. Yippee!


Alas, we may not want to celebrate quite yet. First, those in that bottom 1.6% are truly destitute. I cannot imagine the difficulties these people face.

Second, since inflation adjusted GDP per capita tripled of this period, the rest of us have become quite a bit more wealthy.










The burden to the rest of us of subsidizing the poor does not bite as much. Perhaps public policy should be directed at the lowest X% of the population rather just those below $X per year. We can quibble of the appropriate Xs.

Tuesday, January 9, 2024

Airbnb Constrains Hotel Market Power

Schaefer and Tran have a new paper that estimates price competition between Airbnb offerings and hotels in Paris, France in 2017 using granular data on tens of thousands of rooms. They find that, while these offerings are differentiated, the do put downward pressure on each others' pricing power. 

Using the estimated models, we assess how Airbnb affects hotel profits and consumer welfare and how much Airbnb hosts value the platform. Our simulations imply that Airbnb increases average consumer surplus and decreases hotel profits substantially. 

Specifically, consumer surplus from Airbnb in Paris increases by 32 euro per night per room for a total of 4.3 million euro (about 0.3% of all hotel revenue). Moreover, about a quarter of this is due to lower hotel prices.

Digital platforms have obliterated some traditional marketing channels, e.g., video rental and music stores, but usually some of the traditional channels survive albeit in diminished form, e.g., book stores and taxis. It appears that even if short term rentals do not replace hotels, they still provide some discipline to the market.

Monday, January 8, 2024

Potential Workers Use ESG as an Employer Screen

A new multiple author study looks at how workers sort into, or out of "good" firms, that is, firms with environmental, social, and governance (ESG) practices. From their abstract:

We conduct a field experiment in partnership with the largest job plat-form in Brazil to study how environmental, social, and governance (ESG) practices of firms affect talent allocation. We find both an average job-seeker’s preference for ESG and a large degree of heterogeneity across socioeconomic groups, with the strongest preference displayed by highly educated, white, and politically liberal individuals. We combine our experimental estimates with administrative matched employer-employee microdata and estimate an equilibrium model of the labor market. Counterfactual analyses suggest ESG practices increase total economic output and worker welfare, while increasing the wage gap between skilled and unskilled workers.

Limiting your investment portfolio to only ESG projects should lower returns. However, this could easily be overcome if better workers have a preference for ESG employers.