As an investor, I'm always looking for an edge. Do I have industry specific knowledge that provides unique insights? Do I have a longer-term investing horizon that can allow me to hang on while others jump and off looking to ride short term volatility?
I'm reading and seeing a bunch of press on Sustainable Investing. It comes in many flavors but one flavor is known as ESG. It stands for environmental, social and governance factors, and the general idea is that companies that care about the environment, building social equity, and good governance do better and perform better.
Barron's, in fact, ran a story this week that suggested ESG is a marketing angle for managers who want to appeal to women and millennial because these two groups care more about ESG. Meanwhile, men tend to focus just on performance, apparently (I guess I'm missing the boat).
One thing I find lacking about the ESG bandwagon is it's kind of hard to put your hands on exactly what it is? Is GE an ESG company? They had a whole "ecoimagination" campaign around how green they are but then again they have missed the boat on many new green energy opportunities. Battery storage comes to mind. In some consulting work I did a couple of years back, I asked an assembled team of GE engineers from across the country whether they had or were contemplating a tier-3 locomotive that could run on a biodiesel blend. You could hear crickets.
Then there are green companies that are truly game changers in the world of energy like Tesla. Yet, I'm not so sure ESG measures really capture the value and the opportunities very well. It seems to me some companies are rubbing nickels together and calling themselves green while others have the potential to be true game changers in some way, whether its how we consume energy and emit pollution or new ways to stay healthy or kill cancer.
Finally, I've never really understood why the G belongs with ES? Good governance need not be backed with triple bottom line thinking. It ought to be foundational for all companies. And how do we measure good governance anyway? Interested in your monkey thoughts?!