4 ms·

The idea of investment managers directing capital based on their own corporate purity tests is definitely much newer than the 1960s

SamoyedFurFluff 4y ago
I don’t think it is. Government had enforced diversity metrics in order to prevent hiring all-white union laborers for their contracts pretty early on in the desegregation process. The private sphere followed suit to avoid the label of segregationism.
Apocryphon 4y ago
Or perhaps earlier: https://www.thebalancemoney.com/a-short-history-of-socially-responsible-investing-3025578 https://www.thebalancemoney.com/a-short-history-of-socially-... https://www.mycnote.com/blog/the-history-of-socially-responsible-investing/ https://www.mycnote.com/blog/the-history-of-socially-respons...
eropple 4y ago
This can also (and, frankly, less weasel-wordishly) be framed as "directing capital based on the desires of the stakeholders involved." High-dividend ETFs have "purity tests", they just involve things you don't feel like being pejorative about. And, as 'Apocryphon notes, this is much older than you think besides.
object-a 4y ago
I don’t think they’re doing it for an ideological purity test, they’re doing it because: 1. They believe there is investor demand for funds that take environmental and social impact into account 2. They believe that companies with better environmental, governance, and social Impact ratings will have higher or more stable returns over time You can disagree, but I think there are good arguments to be made for both of those points.
- squokko 4y ago
  Yes, I do agree with your point (1)... there is a class of non-STEM college grads that has solved the chicken-and-egg problem by essentially blanketing every industry at once, demanding "[xxxxxx] justice" on all sorts of topics, which sort of forces everyone's hand simultaneously. That's why it's been highly effective.
  - object-a 4y ago
    This is a ridiculous statement. There are lots of people who will avoid investing in companies for ethical reasons. You might be a religious investor who chooses not to invest in “immoral companies”. I also doubt the people you have in mind have enough financial capital to really force everyone’s hand _unless_ their arguments are actually persuasive
- corbulo 4y ago
  I would modify #2 Generally its not as profitable to go by DEI guidelines, but it does have an anticompetitive effect because smaller orgs simply cannot afford to do it. It's similar to how regulations effect businesses. If there are enough regulations the only ones that can afford to stay compliant are the ones with teams of lawyers. Which is why megacorps lobby for more regulations. It prevents competition from sprouting up.
  - object-a 4y ago
    I don’t know if this is true — we’re largely talking public companies here, which should have resources to meet compliance and governance goals. If they can’t, then they are probably riskier investments. But even if I accept it as true, it doesn’t contradict point 2, which is that investors think they’ll see better or more stable returns

SamoyedFurFluff 4y ago

I don’t think it is. Government had enforced diversity metrics in order to prevent hiring all-white union laborers for their contracts pretty early on in the desegregation process. The private sphere followed suit to avoid the label of segregationism.

Apocryphon 4y ago

Or perhaps earlier: https://www.thebalancemoney.com/a-short-history-of-socially-responsible-investing-3025578 https://www.thebalancemoney.com/a-short-history-of-socially-... https://www.mycnote.com/blog/the-history-of-socially-responsible-investing/ https://www.mycnote.com/blog/the-history-of-socially-respons...

eropple 4y ago

This can also (and, frankly, less weasel-wordishly) be framed as "directing capital based on the desires of the stakeholders involved." High-dividend ETFs have "purity tests", they just involve things you don't feel like being pejorative about. And, as 'Apocryphon notes, this is much older than you think besides.

object-a 4y ago

I don’t think they’re doing it for an ideological purity test, they’re doing it because: 1. They believe there is investor demand for funds that take environmental and social impact into account 2. They believe that companies with better environmental, governance, and social Impact ratings will have higher or more stable returns over time You can disagree, but I think there are good arguments to be made for both of those points.

squokko 4y ago
Yes, I do agree with your point (1)... there is a class of non-STEM college grads that has solved the chicken-and-egg problem by essentially blanketing every industry at once, demanding "[xxxxxx] justice" on all sorts of topics, which sort of forces everyone's hand simultaneously. That's why it's been highly effective.
- object-a 4y ago
  This is a ridiculous statement. There are lots of people who will avoid investing in companies for ethical reasons. You might be a religious investor who chooses not to invest in “immoral companies”. I also doubt the people you have in mind have enough financial capital to really force everyone’s hand _unless_ their arguments are actually persuasive
corbulo 4y ago
I would modify #2 Generally its not as profitable to go by DEI guidelines, but it does have an anticompetitive effect because smaller orgs simply cannot afford to do it. It's similar to how regulations effect businesses. If there are enough regulations the only ones that can afford to stay compliant are the ones with teams of lawyers. Which is why megacorps lobby for more regulations. It prevents competition from sprouting up.
- object-a 4y ago
  I don’t know if this is true — we’re largely talking public companies here, which should have resources to meet compliance and governance goals. If they can’t, then they are probably riskier investments. But even if I accept it as true, it doesn’t contradict point 2, which is that investors think they’ll see better or more stable returns