ESG Investing

[basballguy]

I know most of y'all like to talk about social issues (which have no impact on our wallets) but I'm bringing attention to a ludacris proposal that prioritizes social issues over your retirement funds.

https://www.foxnews.com/politics/over-100-groups-back-manchin-gop-plan-block-bidens-woke-esg-investing-rule

In a nutshell, Democratic leadership is supporting efforts to allow money mangers (think dudes that manage your 401k) to invest based on "environment, social, governance" standards...meaning they don't invest with financial standards as their first priority. They're investing with ESG standards.

The concept of ESG investing is novel but quite frankly it doesn't net the returns "traditional" investing does. It's a clear example of democratic leadership doing what it thinks is right without actually understanding the consequences.

In summary, social issues aren't gonna help you retire. Common sense will.

[NATI BENGALS]

Not something I am too familiar with.

This was a decent read.
https://corpgov.law.harvard.edu/2023/02/02/esg-investing-after-the-dol-rule-on-prudence-and-loyalty-in-selecting-plan-investments-and-exercising-shareholder-rights/

I see a few things.

Sounds like fear mongering. And yet another chance to cry woke.

Biden is concerned about democracies ability to keep up with autocracies. This sounds like it could improve competition and allow the free market to do it's thing.

And isn't a diversified portfolio ideal?

[Stewy]

ESG investing should be a choice, but an INVESTORs choice, not a money managers choice. Just like you can choose to be more aggressive or conservative with your portfolio, you should be able to go ESG,

However, IMO ESG investing is a fools game. It isn't start up socially conscience industries that are going to make money and push us into a limited fossil fuel future, but Energy companies. Because like it or not the Energy companies have the money to invest in the future that govt's squander away and bicker about. It's already happening. While govt's can't decide what to do or how to do it, it's big energy that's investing in clean energy.

So if you want to invest in clean energy, do not go for ESG, but do some research on which Big Energy Co. is doing the most investing in renewables and put your money there. At least then your portfolio will grow and you can ease your conscience.

[basballguy]

(02-08-2023, 03:21 AM)NATI BENGALS Wrote: Not something I am too familiar with.

This was a decent read.
https://corpgov.law.harvard.edu/2023/02/02/esg-investing-after-the-dol-rule-on-prudence-and-loyalty-in-selecting-plan-investments-and-exercising-shareholder-rights/


And isn't a diversified portfolio ideal?

Your linked study is an interesting read....but when they use words like "may", "could",  or "should" it becomes all speculative for me and misdirects from actual facts.  

There are likely people that love the idea of ESG investing...and sadly, those people will probably not experience the same gains as common sense investing.  

Also, this has very little to do with diversification.  Fair question though.  There's tons of ways to diversify.  However, if you gave me 100 bucks to invest on your behalf and i told you 20 bucks of that will net a return of 1% while the other 80 bucks will net a return of 8%, wouldn't you rather have the 8% return?  

In the grand scheme of things, if someone is vigilant in their investing, this probably doesn't impact them.  But most people don't even look at their 401k for decades and those will be the ones that get screwed.  I personally would not invest in any fund that isn't attempting to maximize returns.  

[basballguy]

(02-08-2023, 08:47 AM)Stewy Wrote: ESG investing should be a choice, but an INVESTORs choice, not a money managers choice.  Just like you can choose to be more aggressive or conservative with your portfolio, you should be able to go ESG,  

However, IMO ESG investing is a fools game.  It isn't start up socially conscience industries that are going to make money and push us into a limited fossil fuel future, but Energy companies.  Because like it or not the Energy companies have the money to invest in the future that govt's squander away and bicker about.  It's already happening.  While govt's can't decide what to do or how to do it, it's big energy that's investing in clean energy.

So if you want to invest in clean energy, do not go for ESG, but do some research on which Big Energy Co. is doing the most investing in renewables and put your money there.  At least then your portfolio will grow and you can ease your conscience.

Right?  And that's just in energy.  The "S" and "G" are what really get me though.  I don't give a flying fk what a CEO makes when it comes to my investments.  I do not care about a company's political contributions.  I care about my bottom line since that's what allows me to provide for my family.  

For others reading, here's a chart with some examples of ESG guidelines:

[treee]

Investor class isn't going to get jack squat eventually if many of the issues addressed by esg principles are ignored. Simple as that. Also moves like this wouldn't be necessary if federal republicans were actually interested in governing rather than political grandstanding.

[basballguy]

(02-08-2023, 05:49 PM)treee Wrote: Investor class isn't going to get jack squat eventually if many of the issues addressed by esg principles are ignored. Simple as that.

Lol what?  care to elaborate why you think this?  

[Goalpost]

There are already solar and wind companies you can invest in individually. I guess if they are included in mutual funds, which some are, so be it, but as long as there is disclosure for the investor to see. The investor can choose what they want. I mean, biotech is speculative also.

Five to ten years ago, pot stocks got hot and then the bottom fell out of them. I just prefer myself to not be so speculative when you can invest in mature companies with a good track record. There is no need to switch away from that proven history.

[treee]

(02-08-2023, 06:00 PM)basballguy Wrote: Lol what?  care to elaborate why you think this?  

Some of the things like increasing instability from climate change, mass unionization from poor labor practices, toxic ground & water due to pollution, social unrest from systemic racism will all do more to undermine investment returns and ultimately will likely cost a lot more than the ~1.5 percent return per year difference between esg and standard. You have to look beyond quarterly returns and look at the overall health of the system that that these investments reside. Stability is good for business and 50 years of laissez faire policy has left the state of society in a much more volatile position. 

[CKwi88]

(02-08-2023, 03:21 AM)NATI BENGALS Wrote: Not something I am too familiar with.

This was a decent read.
https://corpgov.law.harvard.edu/2023/02/02/esg-investing-after-the-dol-rule-on-prudence-and-loyalty-in-selecting-plan-investments-and-exercising-shareholder-rights/

I see a few things.

Sounds like fear mongering. And yet another chance to cry woke.

Biden is concerned about democracies ability to keep up with autocracies. This sounds like it could improve competition and allow the free market to do it's thing.

And isn't a diversified portfolio ideal?

That's exactly what it is. Unfortunately your link is way tougher to read than Fox News though. 

Much easier to just say that Biden is trying to force "woke investing" on 152 million Americans. 

[*Nately120*]

(02-08-2023, 07:00 PM)CKwi88 Wrote: Much easier to just say that Biden is trying to force "woke investing" on 152 million Americans. 

Well the joke is on him, because by the time I have enough money to invest Biden will be dead and I might be, too.

[basballguy]

Everyone focusing on the environment aspect of it (which is what most everyone cares about) but there are a few key points being missed here.  

1) First and foremost, there is no standard.  is Nike a good company or bad company?  Some will say they do great with social justice and it's an easy yes, others will cite offshore labor practices and say it's bad.  It's all subjective.  I saw an example on the internet a few weeks ago that had Pfzier being a negative company with Moody's, slightly above average company with Standard and Poors, and great company with CSRHub.  Who's right?  

Source for ratings:  https://reason.org/commentary/esg-investing-is-bad-for-the-economy/   (you can read the article if you want, i'm just linking it for the chart)

2) ESG investing adds risk to a fund.  All it does is reduce options....you don't like AT&T or Verizon's political contributions?  No longer an option for the fund.  You don't like how much a CEO makes or how diverse their board is?  Again, eliminated.  So no, it's not a positive for diversification as someone mentioned earlier.  

3) These investing practices should be disclosed.  It's one thing if you decide to put your 401k/IRA in like say....Vanguard's Social Index Fund...you know exactly what the fund manager is targeting because it's in the disclosures (which by the way that fund is underperforming over the last year compared to the rest of the market    ) but when it's not in the disclosures and the fund managers are just making those decisions, then they no longer have their clients best interests in mind.  

4) We're talking about (mostly) retirement accounts.  Someone commented earlier about how it's a trivial percent and said 1.5% difference.  (It's much higher than that) but even if it was 1.5%....i'm sorry but 1.5% missed out every year for 40-60 years is a shit ton of money not in your retirement account.  Nobody wants to work until they're 70 or 65 or whatever it is....but that difference will end up being huge.

[NATI BENGALS]

(02-08-2023, 02:26 PM)basballguy Wrote: Your linked study is an interesting read....but when they use words like "may", "could",  or "should" it becomes all speculative for me and misdirects from actual facts.  

There are likely people that love the idea of ESG investing...and sadly, those people will probably not experience the same gains as common sense investing.  

Also, this has very little to do with diversification.  Fair question though.  There's tons of ways to diversify.  However, if you gave me 100 bucks to invest on your behalf and i told you 20 bucks of that will net a return of 1% while the other 80 bucks will net a return of 8%, wouldn't you rather have the 8% return?  

In the grand scheme of things, if someone is vigilant in their investing, this probably doesn't impact them.  But most people don't even look at their 401k for decades and those will be the ones that get screwed.  I personally would not invest in any fund that isn't attempting to maximize returns.  

My big take away from the one I linked was

"The heart of the 2022 Biden Rule is the requirement that an ERISA fiduciary must make investment decisions “based on factors that the fiduciary reasonably determines are relevant to a risk and return analysis.” The heart of the 2020 Trump Rule was the requirement that an ERISA fiduciary must make investment decisions “based only on pecuniary factors.” But a pecuniary factor was defined by the Trump Rule to mean one “that a fiduciary prudently determines is expected to have a material effect on the risk and/or return of an investment.” The changes in the Biden Rule from the Trump Rule are thus cosmetic: changing the terms “prudently” to “reasonably,” and “material” to “relevant.” In practical terms, the Biden Rule replaced the Trump Rule’s use of the term “pecuniary factors” with its definition provided in the Trump rule. Crucially, both the Biden Rule and the Trump Rule specify that a “fiduciary may not subordinate the interests of the participants and beneficiaries in their retirement income or financial benefits under the plan to other objectives, and may not sacrifice investment return or take on additional investment risk to promote [other] benefits or goals.”"

[NATI BENGALS]

Very thrilling and interesting Department of Labor stuff. I guess this is what all the commotion is about.

https://www.federalregister.gov/documents/2022/12/01/2022-25783/prudence-and-loyalty-in-selecting-plan-investments-and-exercising-shareholder-rights

[Stewy]

(02-09-2023, 02:50 AM)NATI BENGALS Wrote: Very thrilling and interesting Department of Labor stuff. I guess this is what all the commotion is about.

https://www.federalregister.gov/documents/2022/12/01/2022-25783/prudence-and-loyalty-in-selecting-plan-investments-and-exercising-shareholder-rights

Ok I skimmed over that, but I'm not a business / financial person.  Could someone summarize plz?  Like very short summary?  Thx

[CKwi88]

(02-09-2023, 01:33 PM)Stewy Wrote: Ok I skimmed over that, but I'm not a business / financial person.  Could someone summarize plz?  Like very short summary?  Thx

The TLDR, at least as pertaining to the OP, is that ESG factors may be considered when making financial decisions. There is no mandate to consider ESG factors, there is no bias in favor of them, they are simply one of the many factors weighed when analyzing risk and return. 

In other words, this is all a f***ing nothingburger and a large waste of time crying about supposed "woke" policies, and OP's "nutshell" analysis is complete and utter bullshit.

[Stewy]

(02-10-2023, 11:04 AM)CKwi88 Wrote: The TLDR, at least as pertaining to the OP, is that ESG factors may be considered when making financial decisions. There is no mandate to consider ESG factors, there is no bias in favor of them, they are simply one of the many factors weighed when analyzing risk and return. 

In other words, this is all a f***ing nothingburger and a large waste of time crying about supposed "woke" policies, and OP's "nutshell" analysis is complete and utter bullshit.

Ok.   Strangely, I must have skimmed effectively because that was the jist of what I got.  I asked for the summary, since it looked like "It's ok as long as everything else is equal" was as you say a "nothing burger".  

As i said above ESG investing should be the choice of the investor, not the money manager.  I want my guy maximizing my profits.....I'll be woke in other ways.

[CKwi88]

(02-10-2023, 11:33 AM)Stewy Wrote: Ok.   Strangely, I must have skimmed effectively because that was the jist of what I got.  I asked for the summary, since it looked like "It's ok as long as everything else is equal" was as you say a "nothing burger".  

As i said above ESG investing should be the choice of the investor, not the money manager.  I want my guy maximizing my profits.....I'll be woke in other ways.

Exactly. And ESG investing and maximizing profits aren't mutually exclusive. The hope would be that if ESG can maximize profits, go for it. If not, don't, simple. All the rules are saying is that it is permissible to weigh ESG factors. 

[basballguy]

(02-10-2023, 11:04 AM)CKwi88 Wrote: The TLDR, at least as pertaining to the OP, is that ESG factors may be considered when making financial decisions. There is no mandate to consider ESG factors, there is no bias in favor of them, they are simply one of the many factors weighed when analyzing risk and return. 

In other words, this is all a f***ing nothingburger and a large waste of time crying about supposed "woke" policies, and OP's "nutshell" analysis is complete and utter bullshit.

You clearly don’t get it and that’s ok.

[Stewy]

(02-10-2023, 01:02 PM)basballguy Wrote: You clearly don’t get it and that’s ok.

Then plz explain?