Government-mandated ESG disclosures—the costs likely outweigh the benefits

Hence, mandated ESG disclosures will improve the efficiency of Canada’s capital markets. ESG disclosures, mandated by government, therefore enable investors to do well by doing good. Of course, some argue that many investors will sacrifice financial returns to support highly-rated ESG companies. If this is true, mandated ESG disclosures should result in lower risk-adjusted returns for investors who follow an ESG-themed investment strategy. In either case, if Canada soon mandates ESG disclosures, it will impose economic costs on Canadian companies that will likely outweigh any economic benefits.