No announcement yet.

Socially conscious investing -- bonds (?) Also companies with women leadership

  • Filter
  • Time
  • Show
Clear All
new posts

  • Socially conscious investing -- bonds (?) Also companies with women leadership

    So it looks like conscious investing (ESG = environment, social and corporate governance) directed investing is also coming to bonds, as with new ETF bond offering by Vanguard:

    It's intermediate-short term corporate bonds, mostly from medium-sized 'blend' (i.e. not growth not value) companies. It's marginally higher (maybe 0.02-0.05) expense ratio than I would expect for a similar style subsection of the bond market. Interestingly the news story had about a 50/50 split thumbs up/thumbs down on the Vanguard website. What do people here think (my guess is "meh, do it if you want" will be the consensus answer for plurality of the forum). I am actually a tiny bit on the positive side on this one for a couple reasons: (a) expense ratio difference is minimal, so that's a wash (b) good governance structure = maybe slightly lower risk of default (wild speculation here) (c) general trend along milenial investors to align your investment $ with one's values --> bidding up the price for this ETF?

    Conversely a bond is a bond, I don't mind ever so slightly tilting toward corporate with slightly higher yield, especially since the fed appears to be picking up the hat.

    On a related note, also worth seeking comments about: what does the group here think about investing in a fund with significant role of women in leadership? Fidelity has recently come out with that fund:

    (127 holdings, top 10 = 18%, quick peek at morningstar shows it's a large-mid cap growth, with a slight tilt toward tech & finance. On that note for sake of account holders I hope Citibank doesn't get pushed into the holdings just because a woman got promoted as the CEO. Not a big fan of that bank, better than WFC or BAC, but bleh).

    One of the reasons I ask:

    (though I am sure as with a lot of social sciences studies, there could be plenty of holes poked into the conclusions of the studies this article is based on). To me, it's another "factor-based" investing with an unproven track record, unclear guidelines, etc. Not worth the higher expense ratio, but if it floats your boat and/or fits your investment values probably isn't gonna hurt any more than the general large-mid cap growth fund with ESG agenda like DSI (iShares MSCI KLD 400 Social ETF). On second thought, I plugged the fidelity ticker FWOMX into a correlation matrix with VTI and DSI and the correlation (R) was lower than I expected, only 0.73 and 0.79, with the HUGE caveat of a very short track record in a very volatile recent market.
    Last edited by Marko-ER; 09-24-2020, 11:36 AM.

  • #2
    I am highly skeptical of ESG funds.

    First I I am skeptical that they help advance their Social goals. It only takes a small portion of 'non-ESG' investors to keep the prices of these oil/tobacco/etc companies efficient, and so I highly doubt that ESG funds limit these companies abilities to raise capital. Paradoxically, it actually might make corporate governance worse at these firms by ensuring that socially minded investors are not voting shareholders (talking equity funds here obviously, not bond funds). Ironically, I think it would make more sense if ESG funds only purchased tobacco/oil/etc companies and used the voting power to improve corporate governance.

    ​​​​​​Second, I am skeptical that there is any reason to believe ESG funds will deliver better returns. It's just another type of factor investing, and one with scant evidence to support it. I think the markets are sufficiently efficient that I can't beat them. That means I don't place bets on large cap, small cap, value, momentum, tech, energy, healthcare, ESG, companies run by women, companies run out of Iowa, companies that were started on Tuesdays, companies with left handed CEOs. There will always be articles in the financial press discussing some strategy that will let you outperform the market - it's all marketing and noise.

    I find things like the Fidelity Women Leadership fund to be particularly bothersome... Look at those fees. In reality I don't think the fund will have any impact in helping companies run by women or promoting female leadership, but it is a very exploitative marketing tactic to take advantage of /profit from socially minded investors (and ironically, it will disproportionately exploit female investors).

    But maybe I'm just cynical. Curious to hear other's thoughts.


    • #3
      It’s just a market segmentation move as well as virtue signaling.


      • #4
        If I wanted to stick it to a company I would just boycott their products/services. I do not think this actually does anything but it would make me feel better then avoiding investing in them.

        Example. I hate Facebook. I think it causes way more misery then good. At the very least it is a huge time suck. I do not have an account and encourage those I know to avoid it (with practically no success). But avoiding them in the market would be difficult and unnecessary. If they do well they make me money. If they fail mankind still has a chance. Win Win.


        • #5
          I am politically/socially agnostic when making any investment choices. If I object, I vote with purchasing dollars. Very rare.


          • #6
            You need to keep emotion out of investing. To be honest, you could find something with every company that you don't agree with.


            • #7
              Yeah so I was initially intrigued by these funds when I first heard of them. So I went to their profile page and looked at their holdings. They are virtually identical to any other total stock market index funds. And there are companies on there, that in my mind, should never have the term “environmentally conscious” associated with them.. Procter and Gamble (ever heard of palm oil and it’s role in the destruction of the rainforests?), McDonald’s (think of all the single use plastic waste they alone are solely responsible for), Costco (Same as McDs), etc.
              These companies, at best, have probably signed some sort of internal BS statement claiming that they will behave themselves from now on. I’m not going to hold my breath expecting anything good from them.


              • #8
                Philip Morris is moving away from cigarettes to find a safer way to deliver nicotine. Does this qualify them?

                Not a fan of ESG investing, I'm not going to tell someone not to do it, but it isn't for me.