End of Week Notes
Fixing the misalignment between how markets function, and how we need them to function
Much of the investment world wants to talk about ESG through the narrow lens of investment strategies or approaches. You can see this in the recent Motley Fool interview with Martin Whittaker, CEO of JUST Capital, which I nonetheless thought was a great read:
As the MF interviewers keep asking him about the organization’s “ESG framework,” Whittaker endeavors throughout to keep the focus on the bigger picture:
JUST Capital is an independent nonprofit organization, which believes that business, and capitalism, can and must be a force for greater good. We create research, rankings, and data-driven tools to empower people to invest in, work for, buy from, and support companies that most align with their priorities. The ultimate goal is to build a more just marketplace that works for all Americans, one that deals with people’s economic insecurities and heals fear and division. The fault lines of capitalism cause widening inequality and social conflict, and undermine our ability to mount sustained, collective efforts to tackle our most pressing challenges: education, health, local and global environmental well-being, community vitality, upward mobility, and more.
We are essentially trying to fix the misalignment between how markets currently function, and how we — as a society — need them to function.
I think this is a pretty good statement on the potential impact of sustainable investing, generally, on public companies. As more investors concerned about sustainability, or ESG, issues form a larger base of investors in public companies, it sends a message to corporate leaders that they must lead their companies in a way that contributes to the greater good. The growing numbers of sustainable investors aligns with the growing numbers of consumers and workers who are saying the same things. As a result, more corporations are starting to embrace sustainability and purpose.
Danone, for example, is doing just that. Here’s CEO Emmanuel Faber quoted in The Economist last summer:
The “purpose of this firm is not to create shareholder value,” he says. Instead it is to get healthy food to as many mouths as possible, benefiting everyone from suppliers to consumers to owners.
And here’s a quick take on Intel’s embrace of sustainability (along with a discussion of employee activism at Wayfair):
Some corporations are standing up against the shameful immoral treatment of immigrant detainees by the U.S. government. Bank of America announced last week it will stop financing private prison and immigrant detention companies:
Swiss insurer Chubb announced it will stop insuring or investing in companies that derive more than 30% of their revenue from coal-mining or energy production from coal.
“Chubb recognizes the reality of climate change and the substantial impact of human activity on our planet,” said Evan G. Greenberg, Chairman and CEO of Chubb. “Making the transition to a low-carbon economy involves planning and action by policymakers, investors, businesses and citizens alike. The policy we are implementing today reflects Chubb’s commitment to do our part as a steward of the Earth.”
Sustainable investing isn’t happening in a vacuum. It’s happening against a backdrop of major sustainability challenges — I’d count the climate crisis and wealth inequality as the most significant — that major corporations must address both to ensure their own long-term profitability AND to ensure the economic system works better for everyone, something that will benefit corporations and society over the long run.
