I came of age in the queer left in Seattle, where ethicality is paramount. "Environmental" might mean saving dish water and using it to flush the toilet. "Sustainability" might mean dumpstering T-shirts and turning them inside out to silk screen for your queer youth arts festival instead of buying new blank shirts. "Governance" probably had to do with making decisions by consensus in a non-hierarhical collective to avoid leveraging power over one another. When I came to the world of investing, it was immediately clear that ESG (Environmental, Sustainability, and Governance) investing was not exactly to the same rigor that I was accustomed to. An environmental screen might simply mean not dumping millions of barrels of oil into the sea. A gender screen in governance might mean that there is one woman involved in the entire leadership of a company. It makes sense to want to invest your money in businesses you can believe in. But bridging the gap between queer expectations and the reality of business requires a dose of realism. One thing to understand is that generally when investing you're buying shares of publicly traded companies. These companies may have started out as one person with one shop, but grew big enough to "go public". That means that they packaged up their ownership into small units called shares. After the initial public offering, these shares can be bought and sold on the secondary market. That means that you have liquidity--the thing you buy you can later sell. It wouldn't mean much to have shares of Microsoft if couldn't get anything in exchange for them. I mention public markets because often times when you think of businesses that you want to support, you're thinking of your hair dresser or independent book store. But those are private companies. You can own part of it, and you can sell part of it, but you can't sell it on the New York Stock Exchange with the click of a button. In a portfolio if you hear about small-cap companies, we're talking about a $300 million to $2 billion valuation--that's probably more than your favorite bar is worth (financially, anyways). Also remember that the goal of investing is to make money. That's different than supporting your friend's business because you want them to succeed. Mission-focus and profit-focus is a spectrum. On one end you might have profit-focus to the point of breaking the law, which is a low-bar proxy for ethicality anyways. On the other end, you have wealth redistribution. ESG investing tries to strike a balance and seek out companies that will be profitable and also run their businesses ethically. There is plenty of reason to think that a fund that selects relatively more ethical businesses will do well. For example, renewable energies are becoming increasingly necessary. Diverse leadership strengthens an organization and reduces its blindspots. I hold this tension every day as an "agnostic insider" of the finance industry. I can see the value derived from the global economy as it is, container ships of Q-tips and Lego sets floating across the blue globe. And I can also feel the desire of community members to help others in a much more tangible way. Even if that's who we are, let's not be paralyzed or self-sacrificed by ethical perfectionism. Let's look with open eyes at what our options are and what they really mean. The reality of ESG investing may not be quite good enough, but it is growing, and it's a start. With managed expectations, I think we should be willing to engage the endeavors that simply lean in the right direction. It's something.
Afterthoughts
Residents of Washington State: Starting in 2022 there will be a new payroll tax of 0.58% on all employee income. The tax will pay for a new program that covers some long-term care costs, such as nursing home or at-home care. There is a one-time opt-out of this tax if you have a private LTC insurance policy as of November 1st, 2021. For more information go to http://www.wacaresfund.wa.gov/
Comments