Money trees
Are guilt-free gains possible?
Good morning, ethical investors. This is your Stock Market Rundown for February 8th, 2024. Thanks for joining me. Let’s dig in:
TODAY’S TOP STORY: RESPONSIBLE RISK-TAKING
Mother Earth. You love her; I love her. The investment industry claims that we can save her by investing in the right financial products. But be careful: you might be crippling your returns for the sake of “doing good”.
Over the past few years the biggest fad in the fund game has been “environment, social, and governance,” or ESG. The UN published a set of principles for responsible investment to make the money biz more “ethical”. But the investment industry never saw a trend they couldn’t turn into a marketing message.
2021 was the peak year for ESG inflows, with half a trillion bucks flowing into “responsible” products. Companies leaned into claims that investments with higher ESG scores could cut risk and boost returns.
But in 2022, responsible funds underperformed because they didn’t own “dirty” fossil fuel stocks when energy prices were popping. By 2023, launches of ESG funds plummeted, and the theme is now as out of style as skinny jeans and leopard print.
Why? No surprise: most investors aren’t willing to pay up for virtue signaling if the performance sucks. Now, top asset managers like BlackRock have faced a backlash from governments who say they’re breaching their duties by focusing on “social purpose” rather than returns.
Another problem: the vaunted ESG rankings turned out to be ludicrously arbitrary—for example, giving Philip Morris a higher ESG score than Tesla. How exactly are cigarettes that give you cancer more “socially responsible” than electric cars that reduce pollution? That’s like saying a Big Mac is healthy because of the shredded lettuce.
Investors are realizing that an investment product being labeled “responsible, sustainable, and ethical” is kinda like grocery-store cookies being labeled “organic, artisanal, and gluten-free”... what’s inside the box might not be what’s printed on the package.
SO WHAT ELSE IS GOING ON?
Facebook founder Mark Zuckerberg is doling out cash like the users of his social platform used to dole out “pokes.” (2007 was a very different time.) Meta, owner of Facebook, issued its first-ever dividend and reported an earnings beat.
Pharmaceutical manufacturer AbbVie, the maker of Botox, raised its sales forecasts. Ironic, since the company’s customers can’t raise their eyebrows.
Jamie, pull up private islands for sale. Music streaming platform Spotify just signed a new $250 million deal with its top star, podcaster Joe Rogan.
Even in downturns, some markets never go flaccid. Church & Dwight, makers of Trojan brand condoms, beat expectations as price increases swelled margins.
Oil multinational Exxon reported better-than-expected profits, and plans to drill, baby, drill in 2024 with billions in capital spending. Times may be tough in tech, but over in the oil patch, they’re still lighting cigars with hundred-dollar bills.
That's the end of today's briefing, pals; let’s reconvene bright and early tomorrow. Yours in capitalism, The Axe