Is ESG Investing Fundamentally Flawed? And is it even “good” for people? I am a self proclaimed environmentally conscious person.
What are ESG investments?
Socially responsible investing. As the climate transitions to and we consider the future, I truly believe we must be good stewards of our environment, but not for the environment, for us. Here is my greedy green thinking: If we destroy the environment, we destroy our health, our enjoyment and our children’s futures. And that is worth fighting for! Therefore is ESG investing fundamentally flawed or even good for people?
ESG Investing Examples
As you can see I have a pretty hard boiled approach to caring for the environment. In other words, it has nothing to do with the bugs, bunnies and trees, I am concerned with us. And this thinking led me to ESG investing a few years back, which stands for Environmental, Social and Governance. The idea being that the companies are screened so as not to contain companies that are doing “bad things” to the environment, to people (society) and are being governed in an ethical manner. I started with about a 5-10% of assets position into the Vanguard ESG fund.
What is in an ESG fund and is it just marketing?
Definitely could be!
Does ESG Investing Work?
The idea is generally to remove big oil, big tobacco, and other so called bad actors. In general, whereas I support transitions to renewable energy sources and I do not like the deleterious health effects of smoking, it can get muddy from there if you do a deeper dive into the funds.
What are the best ESG funds?
Here is a snapshot of some of the largest holdings in the Vanguard ESG fund.
What are ESG companies?
| AAPL | APPLE INC | 037833100 | 2046251 | 6.72 % | 2,829,353 | $407,313,658 |
|---|---|---|---|---|---|---|
| MSFT | MICROSOFT CORP | 594918104 | 2588173 | 5.77 % | 1,408,555 | $349,321,640 |
| AMZN | AMAZON.COM INC | 023135106 | 2000019 | 2.74 % | 1,673,182 | $166,013,118 |
| GOOG | ALPHABET INC-CL C | 02079K107 | BYY88Y7 | 1.79 % | 1,094,815 | $108,561,855 |
| GOOGL | ALPHABET INC-CL A | 02079K305 | BYVY8G0 | 1.68 % | 1,041,596 | $101,576,442 |
| NVDA | NVIDIA CORP | 67066G104 | 2379504 | 1.48 % | 453,347 | $89,771,773 |
| UNH | UNITEDHEALTH GROUP INC | 91324P102 | 2917766 | 1.43 % | 176,085 | $86,718,341 |
| TSLA | TESLA INC | 88160R101 | B616C79 | 1.29 % | 486,472 | $77,966,867 |
| JPM | JPMORGAN CHASE & CO | 46625H100 | 2190385 | 1.27 % | 549,004 | $76,849,580 |
| V | VISA INC-CLASS A SHARES | 92826C839 |
| PG | PROCTER & GAMBLE CO/THE | 742718109 | 2704407 | 1.04 % | 444,302 | $62,713,227 |
|---|---|---|---|---|---|---|
| META | META PLATFORMS INC-CLASS A | 30303M102 | B7TL820 | 1.03 % | 423,286 | $62,350,028 |
| HD | HOME DEPOT INC | 437076102 | 2434209 | 1.01 % | 194,543 | $61,049,539 |
| MA | MASTERCARD INC – A | 57636Q104 | B121557 | 1.00 % | 160,140 | $60,411,214 |
| LLY | ELI LILLY & CO | 532457108 | 2516152 | 0.91 % | 158,643 | $55,209,350 |
| MRK | MERCK & CO. INC. | 58933Y105 | 2778844 | 0.84 % | 476,247 | $50,896,517 |
| ABBV | ABBVIE INC | 00287Y109 | B92SR70 | 0.81 % | 332,654 | $49,033,200 |
| PFE | PFIZER INC | 717081103 | 2684703 | 0.78 % | 1,063,928 | $47,078,814 |
| BAC | BANK OF AMERICA CORP | 060505104 | 2295677 | 0.77 % | 1,321,915 | $46,716,476 |
| KO | COCA-COLA CO/THE |
Are These Saints?
Let’s first be clear about the irony here. I invest in many of the great companies above, but are they really always good stewards of the environment, for our society and ethically governed in the pursuit of profit? I think not.
How many people have developed type 2 diabetes or heart disease from Coca Cola products? Haven’t many succumbed to deep debt and interest payments from MasterCard and Visa technologies? And really, is Meta (Facebook) really that ethically managed and good for the psychological health of our society?
I could go on and on. Did United Health always serve the health of their customers and how many people have been injured in Tesla self driving cars as we get to be the guinea pigs of beta? I think you see my point, these great companies can certainly act in the grey areas of good actions for the environment and society.
My point here, is be careful who gets to be the judge of ethics. When we start throwing stones, we really ought to take a hard look around.
Is the Name Accurate?
Maybe my issue is with the name. Perhaps these should be called funds that exclude fossil fuels, tobacco and gambling? Minus FTG fund? I guess that does not sound as nice as ESG. The marketing team worked hard on that one!
Do they perform?
Vanguard ESG fund are not performing too well over the years, perhaps a 6% return since inception. Maybe if they performed well I would cut them a break? Do they give out an esg investing certificate?
Greenwashing
Here is my bottomline, I want to look at things realistically, not how they are marketed to me. If these funds are truly filled with companies that are improving the plight of humanity and making money, then I am all in. I just do not buy that every company is some perfect saintly company. Perhaps there is no such thing.
I will continue to avoid investing in companies that make profit off of the pain and suffering of others. But I will not be quick to go for marketing ploys and labels that seem over simplified or just plain inconsistent.