The Risk of Ignorance: How Financial Institutions Can Make a Difference in Large-Scale Media ESG News Monitoring
(2023) Revue bancaire et financière — Vol. 87, n° 3, p. 176-181 (2023)
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- Abstract
- When firms overlook ESG news in the media and become ignorant, they face four key pitfalls: (i) adverse selection, where they might inadvertently engage with less sustainable partners; (ii) moral hazard, where ignoring ESG issues could lead to irresponsible practices; (iii) heightened reputational risks; and (iv) negative societal impacts due to overlooked externalities. Conversely, a synergy between firms and media outlets in actively scanning for material ESG events can lead to superior societal outcomes. This approach reduces the likelihood of firms becoming embroiled in ESG controversies and enhances their capability to respond effectively to relevant ESG incidents, especially when they have direct exposure. We delve into the challenges facing this proactive system and underscore the pivotal role of financial institutions as agents of change. They are instrumental in steering towards a society where both positive and negative ESG events receive the attention they deserve from the media and corporate decision-makers.
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Citations
Petitjean, M., Boudt, K., & Demarcelle, O. (2023). The Risk of Ignorance: How Financial Institutions Can Make a Difference in Large-Scale Media ESG News Monitoring. Revue bancaire et financière, 87(3), 176-181. https://hdl.handle.net/2078.5/235588 (Original work published 2023)