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Last year I switched from MSCI World Index to MSCI World Custom ESG* Index. With passive investment you want as much companies as possible in your basket so exc

Last year I switched from MSCI World Index to MSCI World Custom ESG* Index. With passive investment you want as much companies as possible in your basket so excluding companies is not something to take lightly. But both these indices perform the same so for me it was an easy choice. * Environment Sustainable Governance. 58 out of 1660 companies are excluded, mainly in tobacco, guns and UN global impact.

floki999 7y ago
That’s great. Collectively, individual investors have tremendous power. Money talks volumes.
conception 7y ago
I'll just note that social/environmental funds like this generally only go for the REALLY REALLY bad folks out there that aren't supergiants. Some of the top holdings of that fund are - Nestle Exxon Johnson & Johnson Facebook etc etc It's a good step but you're not actually divesting yourself from fucks like Nestle.
- benj111 7y ago
  I would say the bigger problem is that everyone has different ethics and what makes a company evil. When you get to the level of those companies, surely they're going to do something evil. I'm not even sure what you're referring to with Nestle (baby milk?). Id prefer to have it based on something more solid like carbon intensity or no oil or something actually measurable by us and the offending companies, rather than nebulous 'ethics'.
  - xkcd-sucks 7y ago
    Nestle kind of goes above and beyond in this regard... Messing with access to potable water is certainly relevant to climate change https://en.wikipedia.org/wiki/Nestl%C3%A9#Controversy_and_criticisms https://en.wikipedia.org/wiki/Nestl%C3%A9#Controversy_and_cr...
    - LifeLiverTransp 7y ago
      I find this strategy to be a huge bet on decentralized energy and desalination/ moisture collection never taking off? How can anyone seriously invest in this without the certainty that technology will not render this monopoly on a life-important good obsolete?
    - throwaway5752 7y ago
      It's not causing climate change, though. That's saying nothing of their ethics, or how the impact their activities are having particularly with the accelerating climate emergency, but it's a matter of critical focus that we stop CO2 emissions, not divest companies that are unethical (admirable, but entirely separate). For what it's worth, that is precisely how this effort will be gaslit. Divide and conquer.
      - sjaknanxnnx 7y ago
        Gaslighting is where an abuser says and does unexpected things that make the abused doubt their perceptions and sanity. I learned about it in film class in college. Suddenly people are using the term to describe all sorts of actions that don’t seem to fit that mold (but that involve some sort of ill intent). What gives?
lukasLansky 7y ago
Does this actually make a diffence, from game-theoretical perspective? It seems to me that if substantial amount of investors start to bias in a certain direction, it will only create an opportunity for active investors to earn money by betting in the other direction, and these active investors will "fix" the "bad" price. Maybe it's not a coincidence those indices perform as well as the rest of the market, as you observed? These active investors don't even have to realize their strategy is based on going against nice guys -- they might be led purely by statistical performance. I'm not trying to be needlessly cynical. I like effective altruism for example. I'm just not sure stock market is a good battleground for ethics.
- andy_ppp 7y ago
  It depends if the people are betting that climate change is real and these companies will start to be treated differently are correct. Could be another 4 years before changes happen...
  - lukasLansky 7y ago
    I agree. If a smart investor notices that a company business model stops working the moment governments pass legislation introducing carbon markets, it's a good investment strategy to short the stock. But notice that it's the government that is doing the heavy lifting here, investors are just diligently passing the shock from the future so resources are not wasted. If there is a climate catastrophe going to happen, but no government is going to punish companies responsible, it won't make sense to try to do that for yourself -- in the same way bad corporations are freeriding on climate, bad investors are freeriding on your efforts to punish such corporations.
  - floki999 7y ago
    We are beyond that point. Climate change is real - I think most sophisticated investors have done enough due-diligence to come to that conclusion, despite all the uncertainties. Investors and traders eat uncertainty for breakfast, lunch and dinner. It doesn’t stop them from making trading decisions. It’s what keeps market ticking.
- 7y ago
tristor 7y ago
I think it's interesting that an environmentally focused fund would exclude tobacco and guns, since neither have anything to do with the environment. That seems more like a partisan political statement/motivation than a focus on environment. I'd go a step further and point out that this fund holds Nestle and Exxon... So it's not really even worried about environmental concerns, it's purely a political statement.
- ac29 7y ago
  The S in ESG actually stands for social, not sustainable. Tobacco and guns are arguably detrimental to society.
  - tristor 7y ago
    Ah, well that helps explain their motivations. It is a bit odd though that they are still holding major companies that have significant negative environmental and social impacts though. At some level, it's just virtue signalling with no meat. Either you care enough to divest your holdings in significant polluters, or you don't.
pyronik19 7y ago
Lovely way to create new arbitrage opportunities for others.
gniv 7y ago
This makes me wonder: How hard would it be for companies to offer slightly customized funds? For example if I wanted to invest in S&P500 minus XOM. I might need to pay higher fees, but it's probably doable. (The reason I want that is partly boycotting environmentally unfriendly companies, partly a belief that they will not grow anymore, for the reasons mentioned in the article.)
wcoenen 7y ago
> Last year I switched from MSCI World Index to MSCI World Custom ESG Index. The S is for social, not sustainable. Other, more climate focused MSCI options: MSCI World low carbon leaders, MSCI World ex-fossil. Disadvantage of "low carbon leaders": this index only adjusts weights, it doesn't actually exclude Exonn-Mobil for example. It just reduces exposure. Disadvantage of "ex fossil": only excludes companies with fossil fuel reserves, does nothing towards airlines for example.

floki999 7y ago

That’s great. Collectively, individual investors have tremendous power. Money talks volumes.

conception 7y ago

I'll just note that social/environmental funds like this generally only go for the REALLY REALLY bad folks out there that aren't supergiants. Some of the top holdings of that fund are - Nestle Exxon Johnson & Johnson Facebook etc etc It's a good step but you're not actually divesting yourself from fucks like Nestle.

benj111 7y ago
I would say the bigger problem is that everyone has different ethics and what makes a company evil. When you get to the level of those companies, surely they're going to do something evil. I'm not even sure what you're referring to with Nestle (baby milk?). Id prefer to have it based on something more solid like carbon intensity or no oil or something actually measurable by us and the offending companies, rather than nebulous 'ethics'.
- xkcd-sucks 7y ago
  Nestle kind of goes above and beyond in this regard... Messing with access to potable water is certainly relevant to climate change https://en.wikipedia.org/wiki/Nestl%C3%A9#Controversy_and_criticisms https://en.wikipedia.org/wiki/Nestl%C3%A9#Controversy_and_cr...
  - LifeLiverTransp 7y ago
    I find this strategy to be a huge bet on decentralized energy and desalination/ moisture collection never taking off? How can anyone seriously invest in this without the certainty that technology will not render this monopoly on a life-important good obsolete?
  - throwaway5752 7y ago
    It's not causing climate change, though. That's saying nothing of their ethics, or how the impact their activities are having particularly with the accelerating climate emergency, but it's a matter of critical focus that we stop CO2 emissions, not divest companies that are unethical (admirable, but entirely separate). For what it's worth, that is precisely how this effort will be gaslit. Divide and conquer.
    - sjaknanxnnx 7y ago
      Gaslighting is where an abuser says and does unexpected things that make the abused doubt their perceptions and sanity. I learned about it in film class in college. Suddenly people are using the term to describe all sorts of actions that don’t seem to fit that mold (but that involve some sort of ill intent). What gives?

lukasLansky 7y ago

Does this actually make a diffence, from game-theoretical perspective? It seems to me that if substantial amount of investors start to bias in a certain direction, it will only create an opportunity for active investors to earn money by betting in the other direction, and these active investors will "fix" the "bad" price. Maybe it's not a coincidence those indices perform as well as the rest of the market, as you observed? These active investors don't even have to realize their strategy is based on going against nice guys -- they might be led purely by statistical performance. I'm not trying to be needlessly cynical. I like effective altruism for example. I'm just not sure stock market is a good battleground for ethics.

andy_ppp 7y ago
It depends if the people are betting that climate change is real and these companies will start to be treated differently are correct. Could be another 4 years before changes happen...
- lukasLansky 7y ago
  I agree. If a smart investor notices that a company business model stops working the moment governments pass legislation introducing carbon markets, it's a good investment strategy to short the stock. But notice that it's the government that is doing the heavy lifting here, investors are just diligently passing the shock from the future so resources are not wasted. If there is a climate catastrophe going to happen, but no government is going to punish companies responsible, it won't make sense to try to do that for yourself -- in the same way bad corporations are freeriding on climate, bad investors are freeriding on your efforts to punish such corporations.
- floki999 7y ago
  We are beyond that point. Climate change is real - I think most sophisticated investors have done enough due-diligence to come to that conclusion, despite all the uncertainties. Investors and traders eat uncertainty for breakfast, lunch and dinner. It doesn’t stop them from making trading decisions. It’s what keeps market ticking.
7y ago

tristor 7y ago

I think it's interesting that an environmentally focused fund would exclude tobacco and guns, since neither have anything to do with the environment. That seems more like a partisan political statement/motivation than a focus on environment. I'd go a step further and point out that this fund holds Nestle and Exxon... So it's not really even worried about environmental concerns, it's purely a political statement.

ac29 7y ago
The S in ESG actually stands for social, not sustainable. Tobacco and guns are arguably detrimental to society.
- tristor 7y ago
  Ah, well that helps explain their motivations. It is a bit odd though that they are still holding major companies that have significant negative environmental and social impacts though. At some level, it's just virtue signalling with no meat. Either you care enough to divest your holdings in significant polluters, or you don't.

pyronik19 7y ago

Lovely way to create new arbitrage opportunities for others.

gniv 7y ago

This makes me wonder: How hard would it be for companies to offer slightly customized funds? For example if I wanted to invest in S&P500 minus XOM. I might need to pay higher fees, but it's probably doable. (The reason I want that is partly boycotting environmentally unfriendly companies, partly a belief that they will not grow anymore, for the reasons mentioned in the article.)

wcoenen 7y ago

> Last year I switched from MSCI World Index to MSCI World Custom ESG Index. The S is for social, not sustainable. Other, more climate focused MSCI options: MSCI World low carbon leaders, MSCI World ex-fossil. Disadvantage of "low carbon leaders": this index only adjusts weights, it doesn't actually exclude Exonn-Mobil for example. It just reduces exposure. Disadvantage of "ex fossil": only excludes companies with fossil fuel reserves, does nothing towards airlines for example.