Can you do well by doing good?
Conspicuous consumption was all the rage in the 1980s. Now “conscious capitalism” is having its moment. Whether or not you choose to embrace it as an investor, you can’t deny the trend.
In August, the Business Roundtable broke 40-plus years of tradition, updating its Statement on the Purpose of a Corporation.
The Business Roundtable declared that “shareholder primacy” is no longer the primary purpose of a corporation, as had been the case since 1978.
Instead, executives from America’s largest corporations committed to lead their companies for the benefit of all stakeholders – customers, employees, suppliers and communities, as well as shareholders.
A total of 181 CEOs committed to the new statement of purpose. And 181 CEOs can’t be wrong…
To prosper over time, every company must not only deliver financial performance, but also show how it makes a positive contribution to society.
I know this may sound like left-leaning gibberish to some of you. But none of these CEOs are commies or socialists.
Fink’s point is that doing “good” is good business. And the trend toward what used to be called “socially responsible investing” is growing by leaps and bounds.
Globally, there was more than $30.7 trillion in sustainable investing assets at the start of 2018, up 34% versus 2016. In the U.S., there is nearly $12 trillion in assets focused on “impact investing,” up 44% from 2016.
These investors often follow the Principles for Responsible Investment developed by the United Nations to cover issues like environmental protection, labor standards and good corporate governance.
Historically, socially responsible investing focused on manufacturers of alcohol, tobacco and firearms. Oil and gas companies have more recently been in focus amid mounting concerns about global climate change.
Now pretty much every company, in every industry, is being viewed through a lens of ESG investing. (ESG stands for environmental, social and corporate governance.)
Complying with these standards can be costly for some companies. The question for executives and investors is whether the tangible short-term loss of “doing good” is worth the intangible benefit of being a good corporate citizen.
Twitter Tackles Political Ads, Facebook Punts
Consider the recent example of Twitter (NYSE: TWTR). CEO Jack Dorsey was widely praised for announcing that his company will no longer accept political advertising.
The praise continued despite the loss of potential revenue during the 2020 presidential election cycle.
Twitter’s new policy is widely seen as a knock on its much larger competitor Facebook (Nasdaq: FB). Last week, Facebook founder Mark Zuckerberg was repeatedly criticized for Facebook’s policy of allowing misleading ads.
Here’s Zuckerberg’s philosophy in a nutshell: Voters should have an opportunity to see if politicians choose …read more
Source:: Investment You