So, what do you all think about the rise of ESG (and now, anti-ESG) investments? Al Gore has been at this a while, and opinions abound on the appropriateness of investing your money to align with your political beliefs.

Here's a beginner comparison of two opposing philosophy ETFs: https://www.etf.com/etfanalytics/etf-comparison/ESGV-vs-YALL

I find it funny that among their top 10 holdings, both have NVDA and TSLA (which have been significantly responsible for their 20%+ year-to-date performance). Are they woke, or not woke? I dunno...

The fact is that each S&P 500 company has many components, and to simplify them down to woke or non-woke misses the boat in practically every case (OK, maybe not companies like My Pillow or Ben & Jerry's). This boils down to marketing, and convincing people to believe they're making a difference (along with their boycotts and twitter campaigns). Which is all OK to me, I guess. It will be interesting to see if there is any sustainable advantage to any politically-aligned offerings (I'm doubting it).

Thoughts?

The only structural advantage either strategy would have is the amount of debt financed government spending being poured into specific industries for ideological purposes (or being withheld, for that matter).

The labels don't correlate to anything.

Exxon is listed with a top notch ESG score, while Tesla is left out.

Disgusting, 150 year old, polluting university buildings and hospitals on the east coast get top ESG ratings on their bonds because they are affiliated with IV league colleges, while green, super efficient new ones in the Southwest get marked with poor ratings.

This might be a bit off topic but I heard a great line on one of the financial podcasts I listen to

Quote:

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Politics are Red and Blue but money is Green!

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I made some mistakes early on in my investing career because I thought who was in control of the government might have a meaningful impact on the markets but there really isn't much correlation when you dig a little deeper so I wouldn't recommend using the political climate to drive your investing decisions.

I think the ESG grouping is strange, personally. The elements don't necessarily fit with each other.

Governance: Mainly deals with reforms to insulated boards and top management, and is intended to give shareholders a greater voice and more control of how the company is run over time, and in theory, leads to greater returns for common shareholders. I don't see a whole lot of argument on this one - let's say 90%+ agreement from the population overall.

Environmental: While I acknowledge I don't understand how the standards are set (are they always relative to the industry overall?), but in general, people will, if given a choice, choose companies that are good stewards of the environment vs. the slash and burn types. Let's say 65-70% of people support this concept. Personally, I would prefer a static set of policies or standards vs. a moving target based on current trends against competitors.

Societal: Obviously, this is the one that is ridden with politics. And, the factors change based on current events, with seemingly little connection to company or shareholder performance. (Just think how current proponents would react if "freedom of speech" as defined by Elon Musk was added as a factor). How the factors are selected appears arbitrary, and I personally don't believe companies should be forced to be in a leadership position for societal change. That's what elected government is for. Conceptually, depending on who selects the factors, any political "side" can be disadvantaged by what's measured. I would guess less than 40% of the population would support this being a part of an evaluation of a company, once they pay attention to it more closely.

My premise is that people could rally around this concept if they just removed the "S" part of the equation, but I give credit to the designers, who have couched it such that tis portion is camoflauged by the more reasonable elements surrounding it.

Thoughts?

I bleed maroon said:

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I think the ESG grouping is strange, personally. The elements don't necessarily fit with each other.

Governance: Mainly deals with reforms to insulated boards and top management, and is intended to give shareholders a greater voice and more control of how the company is run over time, and in theory, leads to greater returns for common shareholders. I don't see a whole lot of argument on this one - let's say 90%+ agreement from the population overall.

Environmental: While I acknowledge I don't understand how the standards are set (are they always relative to the industry overall?), but in general, people will, if given a choice, choose companies that are good stewards of the environment vs. the slash and burn types. Let's say 65-70% of people support this concept. Personally, I would prefer a static set of policies or standards vs. a moving target based on current trends against competitors.

Societal: Obviously, this is the one that is ridden with politics. And, the factors change based on current events, with seemingly little connection to company or shareholder performance. (Just think how current proponents would react if "freedom of speech" as defined by Elon Musk was added as a factor). How the factors are selected appears arbitrary, and I personally don't believe companies should be forced to be in a leadership position for societal change. That's what elected government is for. Conceptually, depending on who selects the factors, any political "side" can be disadvantaged by what's measured. I would guess less than 40% of the population would support this being a part of an evaluation of a company, once they pay attention to it more closely.

My premise is that people could rally around this concept if they just removed the "S" part of the equation, but I give credit to the designers, who have couched it such that tis portion is camoflauged by the more reasonable elements surrounding it.

Thoughts?

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US O&G production was well on its way to being the lowest-impact, most environmentally conscious in the world before ESG came along. It is totally superfluous and does not prove that anyone cares more then they used to.

JSKolache said:

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ESG pumpers will steal away the wealth of millenials. Its a marketing scheme targeting newbies.

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This is exactly what it is. 100% marketing.

FrioAg 00 said:

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The labels don't correlate to anything.

Exxon is listed with a top notch ESG score, while Tesla is left out.

Disgusting, 150 year old, polluting university buildings and hospitals on the east coast get top ESG ratings on their bonds because they are affiliated with IV league colleges, while green, super efficient new ones in the Southwest get marked with poor ratings.

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I'm no big ESG proponent, but let's be honest... Tesla doesn't know what governance is.

I bleed maroon said:

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I think the ESG grouping is strange, personally. The elements don't necessarily fit with each other.

Governance: Mainly deals with reforms to insulated boards and top management, and is intended to give shareholders a greater voice and more control of how the company is run over time, and in theory, leads to greater returns for common shareholders. I don't see a whole lot of argument on this one - let's say 90%+ agreement from the population overall.

Environmental: While I acknowledge I don't understand how the standards are set (are they always relative to the industry overall?), but in general, people will, if given a choice, choose companies that are good stewards of the environment vs. the slash and burn types. Let's say 65-70% of people support this concept. Personally, I would prefer a static set of policies or standards vs. a moving target based on current trends against competitors.

Societal: Obviously, this is the one that is ridden with politics. And, the factors change based on current events, with seemingly little connection to company or shareholder performance. (Just think how current proponents would react if "freedom of speech" as defined by Elon Musk was added as a factor). How the factors are selected appears arbitrary, and I personally don't believe companies should be forced to be in a leadership position for societal change. That's what elected government is for. Conceptually, depending on who selects the factors, any political "side" can be disadvantaged by what's measured. I would guess less than 40% of the population would support this being a part of an evaluation of a company, once they pay attention to it more closely.

My premise is that people could rally around this concept if they just removed the "S" part of the equation, but I give credit to the designers, who have couched it such that tis portion is camoflauged by the more reasonable elements surrounding it.

Thoughts?

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As someone who has dealt with these "rating agencies" put me in the 10%. You have to understand a few things. First, it's got a very large "racket" aspect. They grade companies poorly then offer to help them with their scores for a fee. Second, the grading takes very little into account based upon company structure, market they operate in, size, recency of public company status, etc. Grading on a one size fits all leads to some very unintended results. Results they will openly admit if you speak with them. Third, the conversations with them often make clear this is a check the box exercise, supported by the fact they often put their most junior person on these calls who just doesn't have the experience to understand or discuss the points. I could go on.