When John Mackay, former CEO of Whole Foods, debuted his book “conscious capitalism” it was met with a collective Wall Street side eye.
The gist of his book was simple: social investing can be profitable. But unwinding investors’ inextricably wound mindset of “profits over environmental preservation” wasn’t easy. Mackay had numerous appearances on national TV and morning shows, but the street continued to balk.
Cut to Thursday afternoon when President Biden made two sweeping moves to help improve the United States global perception on environmental issues.
First, he invited Xi Jinping, President of China to speak at a conference on climate at the White House.
Second, President Joe Biden pledged to cut U.S. greenhouse pollution in half by 2030.
The optics were suspect and Biden’s mission aggressive. But it definitely has larger implications for ESG (environmental, social, and governance) investing.
People now give a darn about protecting the planet and want to put their money where their beliefs lay. And it turns out financial advisors just like you felt the same way.
When we looked at our TrackStar Data names such as MSFT, NVDA, and HD to name a few. Check it:
MSFT: Who knew this tech play could also be considered an ESG? Buzz words like “carbon negative” tend to get glossed over,. But check this out – MSFT, like the Biden administration, have an aggressive plan to be carbon negative in nine short years.
As part of the effort, the company started a $1B fund to reduce emissions and cleaning carbon. Microsoft has taken the lead in its commitment to mitigating carbon. What’s more, MSFT received the highest ESG rating of AAA from MSCI ESG Research in September 2019.
NVDA: Chips are at the top of everyone’s mind and I’m not talking about Pringles. NVIDIA makes those graphic cards for gamers and chips for crypto miners.
As we reviewed in our past rare earth newsletter, chip manufacturing goes hand in hand with mineral and metal mining. So why would this company be on an ESG list? Because they are not playing when it comes to “conflict minerals.”
In simple terms, NVDA has implemented tight due diligence measures to ensure the minerals the company uses for chips are not tied to strife or geopolitical drama. In addition, NVDA is big on governance and gives all of its suppliers, partner-facing workforce, and supplier base on anti-corruption and anti-bribery training.
HD:
OK. It’s hard not to walk into an HD and think “this is waste central.” There are stacks of lumber (prices increased x 3 over the past year) everywhere, metal objects in buckets and during the holidays, chopped Christmas trees, and decor lining the aisles.
BUT the company does have a strict policy like NVDA or not purchasing products that are the source or adjacent to conflict or “exploits natural resources of developing countries.” Also, HD plans on reducing its emissions by 50% into 2035 as well as water consumption by 250 billion gallons. The fact that they are using 250 billion gallons of water, to begin with, is shocking in itself! Sheesh.
Our hot take:
ESGs are no longer an investing methodology meant for your stoner, hippy cousin.
More companies are going to adhere to ESG mandates- this is not going away.
Fundamentals matter. Data over the past ten years indicates socially conscious decisions made for the bottom line, which equates to profitability.
Questions you may get from your clients:
- Can any company be an ESG company?
- How do I make sure the company I am putting my money into is completely conflict free?
- Do EV companies automatically qualify them as an ESG?
- How susceptible are ESG companies to macro catalyst news?
- How can I get my kids to stop using so much toilet paper?