Myth-busting will help accelerate ESG retreat

In recent years the ESG movement, which holds that corporate managers and investors should consider environmental, social and governance issues to benefit various “stakeholders”—in contrast to the more conventional view that the responsibility of business is to increase its profits for the benefit of its shareholders—has gathered force. Despite considerable evidence of ESG retrenching, it remains in wide currency. However, many points made in its favour are not supported by evidence. It’s important to separate myths from reality.

The Fraser Institute’s ESG essay series is a good resource. In one essay, Steven Globerman reviews the research on ESG scores and investor returns and finds that the claim made by many ESG promoters—that companies with higher ESG scores produce higher investor returns—lacks supporting evidence.

In another essay, 2013 Economics Nobelist Eugene F. Fama notes that competitive market forces better address corporate governance issues than externally imposed top-down structures. Many environmental and social problems too are better handled by bottom-up market forces than top-down initiatives, particularly from government.

Additional essays refute other ESG fallacies including that the ESG movement is the result of widespread demand from individual investors, consumers and workers (in fact, it’s primarily a top-down initiative of elites including government); that regulation-imposed ESG mandates improve corporate governance (they actually make it worse); and that business profit-maximization is harmful to stakeholders other than shareholders (in reality, businesses focusing on profits is generally good for their consumers, employees and suppliers). The entire series is worth reading.

Also worth reading is an article in the Financial Analysts Journal by Alex Edmans, a professor of finance at London Business School, which identifies and refutes 10 common ESG myths including the myth that a focus on shareholder value is harmful because maximizing shareholder value promotes an inefficient focus by management on short-term profit maximization. As Edmans explains, “Finance 101 teaches us that shareholder value is an inherently long-term concept. It is the present value of all future cash flows, from now until the end of time.”

To the extent that financial markets are efficient, expected future profits and losses are reflected in company share prices today, so even if corporate managers care only about today’s stock price, they will still try to maximize long-term value.

Edmans also takes aim at the claim that ESG stocks earn higher returns, again appealing to Finance 10. If ESG actually enhances a company’s shareholder value and this is known, it will be reflected in today’s stock price, so investors who buy the stock shouldn’t expect superior returns. “Feel-good” stocks should actually be expected to generate lower returns because if investors like holding certain stocks for non-financial reasons and dislike holding others, they’ll demand higher returns on the disfavoured stocks than the feel-good ones.

Various other myths include that “more ESG is always better” (in fact, ESG “exhibits diminishing returns and trade-offs exist,” Edmans writes) and that people improve ESG performance by paying for it (if people pay for improvements in some areas, it will cause companies to underweight other ESG dimensions). The final myth often promoted by ESG advocates and refuted in Edmans’s article is that regulation is justified because the market is imperfect. The blindingly obvious counterpoint—government is also imperfect.

ESG may be popular, but careful reading on the topic reveals that many points made in its favour are not supported by evidence. That may be one reason the ESG tide, at least in some places, is retreating.

Author:

Matthew Lau

Related Topics:#ESG #ESGRetreat #FraserInstitute #MatthewLau

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Massive government child-care plan wreaking havoc across Ontario

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Massive government child-care plan wreaking havoc across Ontario

Published on June 30, 2025

Todayville

From the Fraser Institute

By Matthew Lau

It’s now more than four years since the federal Liberal government pledged $30 billion in spending over five years for $10-per-day national child care, and more than three years since Ontario’s Progressive Conservative government signed a $13.2 billion deal with the federal government to deliver this child-care plan.

Not surprisingly, with massive government funding came massive government control. While demand for child care has increased due to the government subsidies and lower out-of-pocket costs for parents, the plan significantly restricts how child-care centres operate (including what items participating centres may purchase), and crucially, caps the proportion of government funds available to private for-profit providers.

What have families and taxpayers got for this enormous government effort? Widespread child-care shortages across Ontario.

For example, according to the City of Ottawa, the number of children (aged 0 to 5 years) on child-care waitlists has ballooned by more than 300 per cent since 2019, there are significant disparities in affordable child-care access “with nearly half of neighbourhoods underserved, and limited access in suburban and rural areas,” and families face “significantly higher” costs for before-and-after-school care for school-age children.

In addition, Ottawa families find the system “complex and difficult to navigate” and “fewer child care options exist for children with special needs.” And while 42 per cent of surveyed parents need flexible child care (weekends, evenings, part-time care), only one per cent of child-care centres offer these flexible options. These are clearly not encouraging statistics, and show that a government-knows-best approach does not properly anticipate the diverse needs of diverse families.

Moreover, according to the Peel Region’s 2025 pre-budget submission to the federal government (essentially, a list of asks and recommendations), it “has maximized its for-profit allocation, leaving 1,460 for-profit spaces on a waitlist.” In other words, families can’t access $10-per-day child care—the central promise of the plan—because the government has capped the number of for-profit centres.

Similarly, according to Halton Region’s pre-budget submission to the provincial government, “no additional families can be supported with affordable child care” because, under current provincial rules, government funding can only be used to reduce child-care fees for families already in the program.

And according to a March 2025 Oxford County report, the municipality is experiencing a shortage of child-care staff and access challenges for low-income families and children with special needs. The report includes a grim bureaucratic predication that “provincial expansion targets do not reflect anticipated child care demand.”

Child-care access is also a problem provincewide. In Stratford, which has a population of roughly 33,000, the municipal government reports that more than 1,000 children are on a child-care waitlist. Similarly in Port Colborne (population 20,000), the city’s chief administrative officer told city council in April 2025 there were almost 500 children on daycare waitlists at the beginning of the school term. As of the end of last year, Guelph and Wellington County reportedly had a total of 2,569 full-day child-care spaces for children up to age four, versus a waitlist of 4,559 children—in other words, nearly two times as many children on a waitlist compared to the number of child-care spaces.

More examples. In Prince Edward County, population around 26,000, there are more than 400 children waitlisted for licensed daycare. In Kawartha Lakes and Haliburton County, the child-care waitlist is about 1,500 children long and the average wait time is four years. And in St. Mary’s, there are more than 600 children waitlisted for child care, but in recent years town staff have only been able to move 25 to 30 children off the wait list annually.

The numbers speak for themselves. Massive government spending and control over child care has created havoc for Ontario families and made child-care access worse. This cannot be a surprise. Quebec’s child-care system has been largely government controlled for decades, with poor results. Why would Ontario be any different? And how long will Premier Ford allow this debacle to continue before he asks the new prime minister to rethink the child-care policy of his predecessor?

Matthew Lau

Adjunct Scholar, Fraser Institute

Business

Canada Caves: Carney ditches digital services tax after criticism from Trump

Published on June 30, 2025

Todayville

From The Center Square

By Brett Rowland

Canada caved to President Donald Trump demands by pulling its digital services tax hours before it was to go into effect on Monday.

Trump said Friday that he was ending all trade talks with Canada over the digital services tax, which he called a direct attack on the U.S. and American tech firms. The DST required foreign and domestic businesses to pay taxes on some revenue earned from engaging with online users in Canada.

“Based on this egregious Tax, we are hereby terminating ALL discussions on Trade with Canada, effective immediately,” the president said. “We will let Canada know the Tariff that they will be paying to do business with the United States of America within the next seven day period.”

By Sunday, Canada relented in an effort to resume trade talks with the U.S., it’s largest trading partner.

“To support those negotiations, the Minister of Finance and National Revenue, the Honourable François-Philippe Champagne, announced today that Canada would rescind the Digital Services Tax (DST) in anticipation of a mutually beneficial comprehensive trade arrangement with the United States,” according to a statement from Canada’s Department of Finance.

Canada’s Department of Finance said that Prime Minister Mark Carney and Trump agreed to resume negotiations, aiming to reach a deal by July 21.

U.S. Commerce Secretary Howard Lutnick said Monday that the digital services tax would hurt the U.S.

“Thank you Canada for removing your Digital Services Tax which was intended to stifle American innovation and would have been a deal breaker for any trade deal with America,” he wrote on X.

Earlier this month, the two nations seemed close to striking a deal.

Trump said he and Carney had different concepts for trade between the two neighboring countries during a meeting at the G7 Summit in Kananaskis, in the Canadian Rockies.

Asked what was holding up a trade deal between the two nations at that time, Trump said they had different concepts for what that would look like.

“It’s not so much holding up, I think we have different concepts, I have a tariff concept, Mark has a different concept, which is something that some people like, but we’re going to see if we can get to the bottom of it today.”

Shortly after taking office in January, Trump hit Canada and Mexico with 25% tariffs for allowing fentanyl and migrants to cross their borders into the U.S. Trump later applied those 25% tariffs only to goods that fall outside the free-trade agreement between the three nations, called the United States-Mexico-Canada Agreement.

Trump put a 10% tariff on non-USMCA compliant potash and energy products. A 50% tariff on aluminum and steel imports from all countries into the U.S. has been in effect since June 4. Trump also put a 25% tariff on all cars and trucks not built in the U.S.

Economists, businesses and some publicly traded companies have warned that tariffs could raise prices on a wide range of consumer products.

Trump has said he wants to use tariffs to restore manufacturing jobs lost to lower-wage countries in decades past, shift the tax burden away from U.S. families, and pay down the national debt.

A tariff is a tax on imported goods paid by the person or company that imports them. The importer can absorb the cost of the tariffs or try to pass the cost on to consumers through higher prices.

Trump’s tariffs give U.S.-produced goods a price advantage over imported goods, generating revenue for the federal government.