After some posts I wrote on here about ESG investing @Stalwar reached out to me to to see if I wanted to talk to a journalist at Bloomberg for a piece she was writing about the topic. This is an area I had been reading up about, before that Elon tweet, and I was keen to contribute and also learn more.
We set up a zoom with Natasha who is a specialist ESG investment writer at Bloomberg and spoke for about 45 minutes on the on all matters ESG and my encounters with trying to invest more ethically. I learned a lot from Natasha who is highly knowledgable in her field and some of our conversation features in an article that was published today.
When Neil Baker, a 37-year-old who works in the UK construction industry, started looking for ESG investments less than two years ago, he said he was dismayed at what he found. One stock he really didnât want to own was Facebook parent Meta Platforms Inc. But finding an ESG fund without big tech was almost impossible, he said. âI donât want to over-ham it too much, but I felt like Iâd almost been had because I thought I was buying into the more ethical side of this,â he said. âAnd then you start looking, youâre thinking, why is Facebook in there?â
The article goes into more details around how retail investors look to be turning away from some ESG funds and how the $4,000,000,000,000 ($40tr ⊠13 zeros) has under performed the market substantially this year so far with May 2022 recording the first capital out flows.
I found the who experience really interesting and learned a lot. To butcher a quote from Professor Scott Galloway (Prof G), If you really want to get good at something explain it to a monkey. One of you will walk away still confused the other an more knowledgeable.
In summary I wanted to thank @Stalwar for the opportunity to do something new and something I simply wouldnât have been able to to do without him and the wider PR team. If you get offer the chance I would recommend doing it!
Congratulations @NeilB. Interestingly I read a similar quote in Buffetâs latest shareholder letter. He mentioned the âOrangutan effectâ ⊠apparently something Charlie Munger regularly refers to.
If you sit down with an orangutan and carefully explain to it one of your cherished ideas, you may leave behind a puzzled primate, but will yourself exit thinking more clearly
Anyone who finds Facebook/Meta to be deeply unethical is alright by me! You can take me out for a plate of grass anytime
I donât want your new found fame to go your head⊠but would you sign my Freetrade hoodie for me?
When it comes to my own personal ESG approach, outside of a few speculative holdings, I just try to shovel my savings into new energy related ETFs/funds. Getting away from fossil fuels, providing energy security, disconnecting from autocratic oil states and having a habitable planet for future generations seems like the most pressing thing to me.
ESG is the same as any âmoralâ type decision whether investing or for example politics ie the individual has to find the compromise that suits them best. It is rare that unless you stock pick individual companies that someone elseâs selections and criteria are going to match 100% - the question is where do you compromise?
For example some of the largest investors in renewables are fossil fuel companiesâŠ
On the other question of performance - should we expect performance to match everything else? If these sectors didnât need help then there would be no need for ESG investing as a specific theme as they would be part of the mainstream.
Great article, nice one @NeilB. A shame youâre not wearing a Freetrade hoodie/tshirt in that pic !
Iâd probably question how bad âFlows into ESG funds globally slumped 36% in the first quarterâ is, because we donât know how that compares to flows into other funds?
Have those dropped significantly too, or increased as a result of people shunning ESG funds (which is probably what people would assume from reading the article)?
Or is the drop due to fewer people investing in general, due to tightening of belts to cope with inflation/higher cost of living?
Excellent Excellent question. When people quote things like this they should give a benchmark. The article authors use indices and there is some merit in that. However, what is more germane is âwhat is happening to other funds?â
There is no doubt that a lot of greenwashing is going on. There is no doubt that providers of these funds regularly issue new funds to capitalise on fashions and trends. Buyer beware remains true as ever.
If you take a look at the biggest companies THG at feature in ESG fund theyâre not small companies who are starved of capital. Take V3AM the much lauded vanguard ESG fund -
Money managers are very good a meeting demand and charging for that service, EAG fund costs have come down but weâre for a long time 20% higher than a global tracker fund.
I did ask @Rajan07 for one bit even the head of PR couldnât lay his hand on one. I was wearing my Freetrade socks but the photographer didnât ask me to take my shoes off, for some reason!
Very good point, I started to write a bit about not having a control of non ESG but felt I was going in to the weeds a bit. Maybe should have trusted my instincts, Iâd expect lots of funds to have suffered from capital out flows recently - wonder if the data is out there?
Patrick OâShaughnessyâs recent podcast with Aswath Damodaran was insightful about ESG. I wanted to believe that ESG would have a positive impact, and invested in it, but paying twice the fees to invest in the S&P490 is quite the marketing trick. Potentially it is better to earn the profits from âsin stocksâ and direct in a âgoodâ direction.
Is there someone doing something like what Jack Boggle did for fees as for the environment in investing? BlackRock seem to be the problem, not the solution.
When I think of an ESG fund Iâm thinking about a global or regional tracker with the less savoury participants filtered out - which is almost impossible.
This kind of thematic ETF, while facing the same issues over inclusion, also seems to have quite high fees.
Unless you built your own DIY ETF, ie looked at what companies an ESG fund is invested in and just buy those companies separately, ignoring the âdodgyâ ones.
Fiddly to keept track but if you did it with Freetrade at least no fees, plus no ETF fee.
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