Before we start today's episode, an announcement. A birth announcement. There is a new weekly show

in the Freakonomics Radio Network. A show I think you will love. In fact, we know a lot

of you already love it because we put out a few pilot episodes earlier this year. And

the response was strong. The show is called the Economics of Everyday Things and it's hosted

by Zachary Crocket. You can get it right now in your podcast app. So go do that. Just look

up the Economics of Everyday Things and follow or subscribe for free to hear a sample just

stick around to the end of this episode. And now here's this week's episode of Freakonomics

Radio.

My name is Kelly Shew. I'm a professor of finance at the Yale School of Management. Some professors

want to spend all their time on research. Shew does plenty of research, but she also does a lot

of classroom teaching and she likes her students. I get a lot of research ideas from talking to them

and a lot of insights about how the real world differs from what I'm teaching class. So I like it

when they push back and they say what you're teaching me is unrealistic because that's now how we do it

in a firm. But sometimes it's the students who Shew thinks are unrealistic. That's where she got the

idea for a new paper. I was inspired to work on this paper because I was actually just quite annoyed

by an argument that I had heard frequently by some of my MBA students about how ESG investing is

supposed to make the world more green. ESG stands for Environmental Social and Governance and ESG

investing is about allocating resources in a way that makes money while also improving the world.

When Shew heard people explaining how it was supposed to work, she couldn't make the math add up.

I'm just hearing this argument over and over again and in my head I'm thinking that violates

the basic corporate finance concepts that I teach in class. I too want to make the world more green

but I don't think this is going to work. Today on Freakonomics Radio, why wouldn't it work?

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