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Race To ESG With Or Without Elon Musk

Every time the stock market crashes, investors will have to rethink everything.

Current internal surveys point to a point in the development of the investment industry, where the assets of so-called ESG funds grew 38% last year to $2.7 trillion at the end of March, according to Morningstar Direct. Our experts use weather, diversity or other data to create more than 6,000 funds around the world, overlaying all kinds of rules and filters for the investments you choose.

Consciousness has a price. Funds often charge high fees that can reduce returns if the investment is worse than any alternative they reject. There is considerable confusion as to the actual meaning of the term ESG (short for Environment, Social, Governance).

This could lead to an episode like the one last month when Elon Musk called the entire industry a “fraud” after S&P Global dared to remove Tesla from its ESG benchmarks. She said Standard & Poor’s did so in part because of her allegations of racism and other worker abuse.

Meanwhile, the Securities and Exchange Commission is frantically working to catch up, scrutinizing Goldman Sachs and other big banks and wondering if some banks are labeling ESG funds in funds that may not be worth grabbing investors’ assets.

To help ordinary investors understand this, I turned to two experts who have spent a lot of time researching ESG-represented investments.

The first is Amy Domini, 72, founder and president of Domini Impact Investments and ESG Pioneer. The second is Rachel Rupasiuti, 43 years old. Founder and CEO of Adasina Capital Social.

That’s what they had to say.

Ron Lieber: What is the most precise definition of an ESG standard today, and how has it changed?

AMY DOMINI: Before we start, what’s my favorite word? It was a “moral investment” when I started, but I’ve lost a lot of vocabulary battles in my life.

I think it provides a more robust set of physical data points from which investment advisers can make decisions.

I consider this to be the fulfillment of fiduciary duties. Assets are not managed for the benefit of the beneficiaries if the beneficiaries cannot breathe or if their life is too risky at the end of the asset creation process. So I see it as a means to an end, and that end is a habitable planet and a life worth living. I think it’s a strategy that explicitly recognizes that investors have a role to play in bringing those results to the world.

stock market conditions

River: Rachel, I knew Amy’s money well. Did you come to a different conclusion?

RACHEL ROBASCIOTTI: We call our work an investment in social justice. It is a deep integration of four areas: racial, gender, economic and climate justice.

River: Justice Justice Justice seems messy these days. On the other hand, some investors do not want to invest in weapons manufacturers. On the other hand, many of them want to put more weapons in the hands of the Ukrainians.

Lovaschioti: In a world that our investors want to live in, governments are responsible for arms and defense, and that is not a private matter.

River: Wait, so should the government produce weapons?

Dominic: Capitalism excels at the large-scale distribution of goods and services at low prices. Weapons must not be distributed on a large scale and cheaply.

River: Researchers have been saying for years that so-called active investing is a bad idea. It is very difficult to determine which stocks will outperform the others in the long run. Does ESG investing violate these principles?

ROBASCIOTTI: To be a good investor in social justice, we need to be proactive on these issues and wait and see when our corporate behavior changes in the future in ways that have a tangible and material impact.

Dominic: Take the apron. They had a powerful story to empower small business owners and a powerful theme on economic justice to delight. These intriguing early papers are dwindling to the point where they are being renamed as more and more blockchain companies become.

Lieber: Curious investors are better off playing with the word “active” and thinking of ESG as an active investment. If someone has to pay above average fees, or at least fees above the basic funds that a company like yours charges, no public company should move money quietly like them. a lot of influence Activists keep going. they are making noise

Domini: We have 150 companies in Japan. Written to indicate that there are two genders and your chart does not reflect that fact. Japan is unlikely to solve the shareholder problem, but that doesn’t mean it’s idle.

River: We are in a bear market right now. This is when people want to cut costs in their investment portfolios. The investment industry has long been concerned that money is not cheap. Do you lose in such market conditions?

Domini: We currently have ESG products at Vanguard, Fidelity and TIAA. They all do this because they add value to the investment decision-making process. it doesn’t go away I’m here to stay.

ROBASCIOTTI: Historically, women and people of color, especially black people like myself, have not been able to break into this industry. Now that we’re starting to come up, we’re in a position where we’re under tremendous price pressure. “Reduce costs!”

Organizing, mobilizing, educating other investors, collecting data sets, all of these tasks require people. You should be able to invest in it.

So I’m really curious if anyone makes an impact with a really cheap price. Often with cheap ESGs, you can hit a data wall and get stuck. And we broke the data wall.

Liber: That’s right. But do you still trust the data you get from the company itself (raw numbers or possibly how they are calculated)?

ROBASCIOTTI: We use less data than the companies themselves. Data collected independently by third parties that we verify through our public company practices is what we really trust.

River: Elon Musk may disagree about the added value of ESG. How can I impress her in less than 100 words?

ROBASCIOTTI (laughs): What I’m trying to say is: the reason you’re confused is because you’re the CEO of a cause, not the path to the bottom. The way to the future is people and planets, and a broken society can only make electric cars.

Dominic: He followed my industry instead of chasing indicators that excluded him. The entire industry did not fire him.

Lieber: Individual investors face dozens of environmental, social, and governance options. Goldman Sachs and others want friendly names to count. What is a good framing question to ask when people are financing their purchases?

Robchiotti: Actually there are three. First of all, what is your problem? Because for us, race, gender, economy and climate is where capitalism extracts unsustainable values.

So how to measure it? And the most important question is, beyond any reasonable doubt, who decides what matters. Reach out to those most affected and ask them what is important. Because they are the people closest to the problem and often the furthest from power. This is information that investors currently do not have access to.

River: What is the least notable example of this third example?

ROBASCIOTTI: When I went to the poor people’s campaign and asked what I should focus on, I ended up working with One Fair Wage, which is working to eliminate the minimum wage for tipped workers.

We have created a comprehensive “Investors for Living Wages” campaign and, through our signatory, a collective declaration of investors representing more than $5 billion in investment capital, advocating that all public companies repeal the minimum wage.

River: All of that sounds like a lot to investors. Where are the interactive tools that ensure that only one of the many boxes is the best option?

Dominic: I think moving is better than not moving. I’m not at all interested in who has a better analysis, or if they agree with my analysis. I looked at so-called strict portfolios, which included stocks that I would not put in my portfolio.

Lieber: So this analysis is the paralysis of my problem. Isn’t that the problem of the industry?

Dominic: I love women-owned businesses. If you want to start something!

ROBASCIOTTI: Only 1.4% of the total assets of US-based companies are managed by companies owned by women or people of color. So you can restrict your world from there.

The reason it matters is that doing it the way we’ve always done it has given us the world we live in now. If we had a different world, if we had to invest in doing more of what we really want, we would have to elect a different group of people who weren’t at the table yet.

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