The point of companies are to make money. As a shareholder in a company, I want to see increased valuations, good free cash flow metrics, and an increasing dividend.
The article is right in a way - ESG is infecting companies.
I do not want a company I invest in to "weigh in" on political issues [1]. I do not want to see banks put in racial quotas in order to get preferred rates [1]. I do not want to see a 'restorative decolonial' approach to ESG in companies [2].
For gods sake, I do not want laws to change to remove a companies requirement of a fiduciary duty so they can adopt more esg goals [3].
When did saying "I invest in a company for profit related reasons" turn into such a big boogey man.
> I want to see increased valuations... increasing dividend
> For gods sake, I do not want [environmental, social, or governance] goals
When did saying "I invest in a company for the endless unrestrained amoral growth ethic turning human society into the control theory equivalent of a cancer cell" turn into such a big boogey man?
"there is one and only one social responsibility of business—to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud."
In a way, you could call this the Corporate/Investing equivalent of effective altruism. Generate as much profit as possible and let employees/shareholders use that cash to support the causes they choose.
You need to deliver value to get money. If people with money want the world improved, you must improve the world to get their money.
> I do not want a company I invest in to "weigh in" on political issues [1]
If people want companies doing political things and you do not do political things, they won't give you their money.
> I do not want to see banks put in racial quotas in order to get preferred rates.
Then don't expect "racial" people to put money in your banks and make you money. Don't expect people who care about racial diversity to put money in your bank. They have a choice.
> As a shareholder in a company, I want to see increased valuations, good free cash flow metrics, and an increasing dividend.
Then demand your company responds to the needs of the people whose money you want. Companies aren't entitled to make money. They must respond to peoples' values and needs.
"Valuations" isn't just a metric. It reflects the value of the company to people. If the company doesn't reflect its customers' values, its valuation won't increase.
> The point of companies are to make money. As a shareholder in a company, I want to see increased valuations, good free cash flow metrics, and an increasing dividend.
There are companies that have other primary goals.
It is interesting to see this opinion so high up when it is abstracted, but as soon as you drop down to specifics in something like tech you get mountains of complaints about Google abandoning "don't be evil" or ad-tech companies in general being cancerous companies that harm society. If it were really all about the bottom line then these companies would be among the very best companies in the world. They make a shit load of money!
Unless it's mandated, everyone going for those things should be seeing worse outcomes, e.g. banks discounting fundamentals and including the racial markup of their customers in decisions would be expected to perform worse than others, wouldn't they?
You'd just need to invest into companies that are explicitly not focusing on ESG. Of course, there's probably some concern that it'll be normalized and the government goes "well, now that half of companies are doing it voluntarily, we can just force the other half to also do it so it's fair", but that aside it sounds like it should provide a good signal for you where not to invest.
The problem is companies prioritize profits over humanities basic needs like a functioning planet and climate.
Regulation should really be the solution imo. The cost of ruining the climate should be higher so companies are forced to change their practices. But if the government is incapable or unwilling to regulate it and you still invest in them in order to make money, then what you're really saying is
"I'm going to invest in this company for profit related reasons even if the company is willing to destroy the planet in order to make more profit"
The ESG push of the last 5+ years was rooted in good reasons. But the approach was wrong. In finance, ESG metrics are just factors like value, growth, momentum, etc... Those factors need to explain risk vs returns. The issue is they never did. There was never any explanatory power behind these things. Even the massive backing by asset managers like Blackrock was not sufficient enough to create demand because ESG factors were all over the place: 20 different providers with 20 different BS methodologies - mostly driven by NLP-style approach to parsing quarterly reports. Ultimately you throw in some nice words and greenwash the heck out of your report and your ESG metrics go up.
The free and open market approach prevails. And if we want to see ESG impact the world around us, we should have the free market dictate how that happens rather than Larry Fink.
I would like to see not the 'free market' dictate how it happens - I would like to see companies that harm their investors end with their ceo/cfos perp walked out and arrested.
I want to see companies remember they have a fiduciary duty to their investors.
I think Cullen Roche is correct when it comes to ESG:
> 2) The secondary market is a bad place to enact change. The intelligent defense of ESG is “by reducing the demand for a stock we can increase its cost of capital and impact its operating performance.” This is true to some degree, but I think this is dramatically overstated. For instance, the firms in the S&P 500 are all large established firms that have more than enough capital to finance their operations. They aren’t using the secondary equity markets to fund their operations. In fact, most firms have so much capital that they’ve been net buyers of stock in the last 50 years. So, this puts the cart before the horse. The better way to think of public companies is to think of them like horse betting. We can bet on the horses, but secondary market purchases are just private exchanges, not cash issuance to firms. As a result, betting on the horses doesn’t change the outcome of the race. Similarly, our secondary market purchases and sales have a far smaller impact on the firm’s operations than we might think.[1]
> 3) ESG investing puts more money in the hands of bad actors. Point 1 is the most basic arithmetic of markets. A smart indexer decides to own all the firms in the market because we don’t know which firms will perform better or worse. So, when you reduce exposure to certain firms because they aren’t aligned with your moral views then you increase the odds that you’ll earn a lower return. This means that someone else is earning a higher return and potentially investing more of that money into the causes you don’t believe in. You are, in essence, choosing to earn a lower return thereby funding the very types of people you might disagree with.
So if an oil tycoon can get extra returns, he can then 'invest' some of those returns in funding astroturfing campaigns and false studies to cause confusion about climate change, thus helping to keep climate initiatives at bay. People who ESG invest may have lower returns and so may have fewer resources to fight against the oil tycoon.
China most likely since they benefit the most. Russia doesn't really have much industry. Then again they both benefit with the destruction of the US capital markets by ESG/DEI initiatives so there is that.
[+] [-] OrangeMonkey|3 years ago|reply
The article is right in a way - ESG is infecting companies.
I do not want a company I invest in to "weigh in" on political issues [1]. I do not want to see banks put in racial quotas in order to get preferred rates [1]. I do not want to see a 'restorative decolonial' approach to ESG in companies [2].
For gods sake, I do not want laws to change to remove a companies requirement of a fiduciary duty so they can adopt more esg goals [3].
When did saying "I invest in a company for profit related reasons" turn into such a big boogey man.
[1] - https://corpgov.law.harvard.edu/2020/06/17/using-esg-tools-t...
[2] - https://www.linkedin.com/pulse/anti-racism-esg-just-might-sa...
[3] - https://www.esginvestor.net/reforms-needed-to-free-investors...
[+] [-] schiffern|3 years ago|reply
> For gods sake, I do not want [environmental, social, or governance] goals
When did saying "I invest in a company for the endless unrestrained amoral growth ethic turning human society into the control theory equivalent of a cancer cell" turn into such a big boogey man?
[+] [-] gadders|3 years ago|reply
"there is one and only one social responsibility of business—to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud."
In a way, you could call this the Corporate/Investing equivalent of effective altruism. Generate as much profit as possible and let employees/shareholders use that cash to support the causes they choose.
[+] [-] diydsp|3 years ago|reply
You need to deliver value to get money. If people with money want the world improved, you must improve the world to get their money.
> I do not want a company I invest in to "weigh in" on political issues [1]
If people want companies doing political things and you do not do political things, they won't give you their money.
> I do not want to see banks put in racial quotas in order to get preferred rates.
Then don't expect "racial" people to put money in your banks and make you money. Don't expect people who care about racial diversity to put money in your bank. They have a choice.
> As a shareholder in a company, I want to see increased valuations, good free cash flow metrics, and an increasing dividend.
Then demand your company responds to the needs of the people whose money you want. Companies aren't entitled to make money. They must respond to peoples' values and needs.
"Valuations" isn't just a metric. It reflects the value of the company to people. If the company doesn't reflect its customers' values, its valuation won't increase.
[+] [-] Tepix|3 years ago|reply
There are companies that have other primary goals.
[+] [-] UncleMeat|3 years ago|reply
[+] [-] satyrnein|3 years ago|reply
What's wrong with people trying out different kinds of organizations, and likeminded people investing in them?
> When did saying "I invest in a company for profit related reasons" turn into such a big boogey man.
Nobody is trying to prevent you from investing how you want; you are the one who wants to stop others from investing how they want.
[+] [-] luckylion|3 years ago|reply
Unless it's mandated, everyone going for those things should be seeing worse outcomes, e.g. banks discounting fundamentals and including the racial markup of their customers in decisions would be expected to perform worse than others, wouldn't they?
You'd just need to invest into companies that are explicitly not focusing on ESG. Of course, there's probably some concern that it'll be normalized and the government goes "well, now that half of companies are doing it voluntarily, we can just force the other half to also do it so it's fair", but that aside it sounds like it should provide a good signal for you where not to invest.
[+] [-] mc32|3 years ago|reply
People do the things that will bring investment. Those things are t always solidly economic reasons.
[+] [-] nend|3 years ago|reply
Regulation should really be the solution imo. The cost of ruining the climate should be higher so companies are forced to change their practices. But if the government is incapable or unwilling to regulate it and you still invest in them in order to make money, then what you're really saying is
"I'm going to invest in this company for profit related reasons even if the company is willing to destroy the planet in order to make more profit"
Which deserves a negative response imo.
[+] [-] thanatos519|3 years ago|reply
https://en.wikipedia.org/wiki/Goodhart's_law
[+] [-] vardump|3 years ago|reply
[+] [-] anonu|3 years ago|reply
The free and open market approach prevails. And if we want to see ESG impact the world around us, we should have the free market dictate how that happens rather than Larry Fink.
[+] [-] OrangeMonkey|3 years ago|reply
I want to see companies remember they have a fiduciary duty to their investors.
[+] [-] passwordoops|3 years ago|reply
[+] [-] throw0101c|3 years ago|reply
> 2) The secondary market is a bad place to enact change. The intelligent defense of ESG is “by reducing the demand for a stock we can increase its cost of capital and impact its operating performance.” This is true to some degree, but I think this is dramatically overstated. For instance, the firms in the S&P 500 are all large established firms that have more than enough capital to finance their operations. They aren’t using the secondary equity markets to fund their operations. In fact, most firms have so much capital that they’ve been net buyers of stock in the last 50 years. So, this puts the cart before the horse. The better way to think of public companies is to think of them like horse betting. We can bet on the horses, but secondary market purchases are just private exchanges, not cash issuance to firms. As a result, betting on the horses doesn’t change the outcome of the race. Similarly, our secondary market purchases and sales have a far smaller impact on the firm’s operations than we might think.[1]
> 3) ESG investing puts more money in the hands of bad actors. Point 1 is the most basic arithmetic of markets. A smart indexer decides to own all the firms in the market because we don’t know which firms will perform better or worse. So, when you reduce exposure to certain firms because they aren’t aligned with your moral views then you increase the odds that you’ll earn a lower return. This means that someone else is earning a higher return and potentially investing more of that money into the causes you don’t believe in. You are, in essence, choosing to earn a lower return thereby funding the very types of people you might disagree with.
* https://www.pragcap.com/my-view-on-esg-investing/
There seems to be decent evidence for Point 3 that ESG generally gives lower returns:
* https://www.pwlcapital.com/sustainable-investing-how-will-it...
So if an oil tycoon can get extra returns, he can then 'invest' some of those returns in funding astroturfing campaigns and false studies to cause confusion about climate change, thus helping to keep climate initiatives at bay. People who ESG invest may have lower returns and so may have fewer resources to fight against the oil tycoon.
[+] [-] goatsneez|3 years ago|reply
[+] [-] uri4|3 years ago|reply
[+] [-] yucky|3 years ago|reply
[+] [-] Raydovsky|3 years ago|reply
The obsession with renewables has hurt Europe beyond measure.
[+] [-] AirStreamer27|3 years ago|reply
[+] [-] Proven|3 years ago|reply
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