Getting slapped by the invisible hand of the market

Perhaps not used the way Adam Smith intended, but we are experiencing a moment where the invisible hand of the market is acting in the self-interest of a generation of investors who see decisions around capital allocation as including more considerations than just time horizon, risk and return. However, the establishment is trying to duck the blow because it does not appreciate the same benefits. The Department of Labor put out a proposed rule to ratchet up the threshold for inclusion of ESG-oriented investments in employer-sponsored retirement plans to a level far exceeding what is applied to the broader market. Responses came in during the 30-day comment period from across the spectrum — from academia to Wall Street — arguing against the rule and making the case for the fundamental investment merits of ESG.

We have put out a new paper, “Slapped by the Invisible Hand“, which takes a step to the side of the fundamental argument for inclusion, and looks instead at the likely-unintended structural problems that would be introduced into the entire retirement plan system by carving out ESG as a separate class of investment receiving inconsistent treatment. You can find it in the Library or follow this link.