Holly's Blog: Put your money where your mouth is

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Twenty years ago ESG investing was largely for Church Foundations and die-hard tree huggers – it was a rather crude tool and was largely all about removing nasties from funds. No fags, no porn, no weapons. This was called ‘ethical’ investing. But today’s is a more complex, nuanced story and it’s as much about backing firms which are good long-term prospects (i.e. will still be around in 30 years and thriving) as it is about blacklisting the bad. The moral judgements have made way for more of the less subjective future-facing judgements.

Interestingly, for the sceptics, evidence is mounting that this style of investing is likely to do better – over the last 5 years there is evidence that global ESG funds have outperformed their traditional alternatives.



Two letters explain some of this. U and N. The UN’s 17 Sustainable Development Goals were set in 2015. (I did need to Google ‘SDGs’ at the conference because fund manager conferences are Acronym City and this one sounded like something Lord Byron picked up after a night in Constantinople). By way of example, the 17 SDGs include no poverty, reduced inequalities, affordable clean energy and climate action.

To work towards these goals, countries throw blistering amounts of money at this. Trillions of dollars. So of course the private sector sniffs opportunity and sticks its snout in. Regulation, legislation and plain old commerce all make a very clear business case for investing in ventures and firms which work towards these 17 goals.

Can activists wear suits?

Back to the conference and the CEO of the Soros Economic Development Fund, Sean Hinton, gave the assembled fund managers a beautifully disguised sugar-coated kick, in that brilliantly lovely way that clever diplomatic people do. He was talking about shareholder activism (voting at shareholder meetings) as a critical conduit for change and obviously thinks that the collective responses can be underwhelming.

In the US, institutional investors (pension funds and other large collectives) own 78% of the stock market. A mere three companies – BlackRock, State Street and Vanguard – own an eye-watering 25% between them. Three firms own one-quarter of corporate America – that is MAD. If they jointly had a corporate strop, imagine the ripples they could make. Money is power and as shareholders they get a say in how companies are run and how directors are rewarded.


Chickens at Exxon?

2019’s Exxon Mobil Board meeting was cited as a case where the Big Boys failed to act. Many investors believe that Exxon continues to lag behind its industry peers on climate change and also fails to engage properly with shareholders. So they consequently voted against the re-election of the entire board. According to Mr Hinton, Fidelity, Invesco and Vanguard voted in favour of the entire board and BlackRock only voted against one. Hmmm.

I suspect in 2020 we will see more work being done to track and publish how the people we employ to look after our money are voting. What they are doing on our behalf? If voting records are sought out, made clearer and more accessible, then it becomes a competitive advantage, it changes how we ‘buy’ our investments, and which fund managers we engage with, and frankly that will move things quicker than me remembering to take my ‘keep cup’ to work every Monday.


What do you think?

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Have a great weekend,


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What does ESG investing mean? Is it the same as ethical investing?

There are so many different labels for the line of investment products that help you do good while you grow your savings. Perhaps the most popular label now is ‘ESG’, which stands for 'Environmental, Social and Governance', but what does it actually mean?

What does ESG investing mean? Is it the same as ethical investing?


Only 1 in 5 people know what ESG investing means. Do you?

On the face of it, ESG is just another impenetrable financial acronym – a vowel and two consonants that only mean something to those in the know. But what lies beneath could change the world…

Only 1 in 5 people know what ESG investing means. Do you?


Peter Parry
It is good to see this issue being raised. A few things to consider are: - definitions: for example, what is the difference between 'ESG' and 'sustainable'? Is there a difference or are they the same? Different organisations seem to adopt different definitions. That does not help meaningful debate about the issues. - What do investors think about 'engagement with' versus simply 'walking away from' companies like Shell and BP and other fossil fuel producers? My own preference is for engagement but I know investors who I respect who say that engagement has a poor track record of achieving change. - Should we be just be targeting the producers of fossil fuels over engagement or non-engagement? They only produce fossil fuels because there is a demand for them. What about the big users such as airlines. A lot of power generation for domestic use still relies heavily on fossil fuels. - there are other areas which have massive sustainability implications - I am thinking primarily of food waste. Colossal amounts of food are wasted throughout the supply chain. A lot of this is driven by supermakets' policies relating to appearance of fruit and veg (too big, too small, wonky etc.) and wanting always to have more than enough on the shelves (hence encouraging growers etc. to over-plant). Surprisingly no one seems to take the supermarkets to task over their role in encouraging food waste. - plastic packaging has come in for a lot of criticism recently. However, plastic packaging helps to reduce food waste either by extending the life of the fresh foods we have come to love or protecting them from damage. The fact that too much waste packaging ends up in the sea is not a reason to talk about banning its use. Better recycling systems would be more appropriate. So, the issues involved in the sustainability debate are often much more complex than it at first seems. It is this complexity which needs to be unravelled to help inform the debate. It is not helped by populist politicians who love coming up with eye-catching but fundamentally half-baked solutions.
17/11/2019 17:20:00
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Always look forward to reading your blogs. :) You are providing us all with great insight into the financial and investment world. Thank you.
16/11/2019 14:56:08
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Ryan Letley
I feel that investors will always follow the money regardless. If the organisations don't follow the ethical trends nowadays, they will not be embracing change (e.g. electric, solar, sustainable food production, carbon reduction, etc). As a result, financially they will suffer as they are not leading, and profits will naturally drop over time. When that happens investors will diversify into ESG embracing organisations.
16/11/2019 10:42:11
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Sustainable Development and ethical investing has to be the way forward. I prefer to choose my own stocks and shares rather than leave it to a fund manager. I don't have much spare time (I have a salaried job and I work freelance, plus I'm doing a PhD part-time), but I have enough time to check how my investments are doing, and switch as and when I see fit. So far it's working out well for me, though I appreciate things can change rapidly.
15/11/2019 18:09:59
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