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This doesn't really address the point. A block of organized investors puts pressure, but if stock owners can only cast non-binding votes, companies can just ign

This doesn't really address the point. A block of organized investors puts pressure, but if stock owners can only cast non-binding votes, companies can just ignore the ESG votes and pay the execs whatever the execs want.

dragontamer 3y ago
I don't think you get how or why ESG works. When Blackrock makes an ESG fund, they'll look at governance issues like "Oh, Netflix has crappy governance", and then refuse to give them any money. ESG-funds focus on funds that have good environmental/social/governance records. If anyone wants ESG-money, they have to match the baseline requirements of ESG-investors and what ESG-funds will offer. Otherwise, you don't get our money. ----------- The other reason why ESG works, is this "G" issue. Companies that care about shareholders will, on the average, return more money back to shareholders over the long run. Companies like Netflix who hoard power to themselves and overpay their C-suite are obviously wasting money anyway, and therefore make for crappy investments. "G", theoretically, is just a good idea for investors to think about _anyway_. AKA: If Netflix are a bunch of assholes, no biggie. I can invest into Disney instead, who has a much better G/Governance structure. And Disney+ is kinda kicking Netflix's ass right now anyway, so I think there's a good chance I'd make more money. If Netflix wants my investment money (or the investment money of anyone else in the ESG group/fund I'm part of), they'll need to fix their G/Governance issues. If for nothing else, for more fair compensation of their C-suite.
- kennywinker 3y ago
  Ah, I see how it applies. It does make me wonder why non-esg large fund investors wouldn't care about this type of control as well? I also think there's some inherent conflict in the S part of ESG investing. i.e. a truly socially responsible company would be returning most of its earning to the workers who actually did the work that earned that money, rather than funneling it to shareholders. Which makes those companies a bad investment, which means ESG funds that extended their S goals that far will fail and ESG funds that don't will get good returns for their investors and continue on - so by definition the S goal is limited.
  - dragontamer 3y ago
    > It does make me wonder why non-esg large fund investors wouldn't care about this type of control as well? The main thing investors have been focused on in the last 30 to 40 years has been lowering fees, in particular "passive" investing which is based on very obvious metrics ahead-of-time. "Active" investors may have cared about these governance issues before, but their fees were just too high in practice. But I think we're seeing the blowback now as more-and-more companies come out with crap governance structures, knowing that they can take advantage of the easy-money from passive investors. I don't know if things will swing the other way. But ESG seems like a way to keep fees low but still have a degree of thought put into corporate politics. I'm not "bullish" on ESG btw. But I think its a step in the right direction, and I think that its a good thing that people are thinking about how to solve the issues that arose from this era of passive investing. Whether or not ESG truly solves the problem remains to be seen however.

dragontamer 3y ago

I don't think you get how or why ESG works. When Blackrock makes an ESG fund, they'll look at governance issues like "Oh, Netflix has crappy governance", and then refuse to give them any money. ESG-funds focus on funds that have good environmental/social/governance records. If anyone wants ESG-money, they have to match the baseline requirements of ESG-investors and what ESG-funds will offer. Otherwise, you don't get our money. ----------- The other reason why ESG works, is this "G" issue. Companies that care about shareholders will, on the average, return more money back to shareholders over the long run. Companies like Netflix who hoard power to themselves and overpay their C-suite are obviously wasting money anyway, and therefore make for crappy investments. "G", theoretically, is just a good idea for investors to think about _anyway_. AKA: If Netflix are a bunch of assholes, no biggie. I can invest into Disney instead, who has a much better G/Governance structure. And Disney+ is kinda kicking Netflix's ass right now anyway, so I think there's a good chance I'd make more money. If Netflix wants my investment money (or the investment money of anyone else in the ESG group/fund I'm part of), they'll need to fix their G/Governance issues. If for nothing else, for more fair compensation of their C-suite.

kennywinker 3y ago
Ah, I see how it applies. It does make me wonder why non-esg large fund investors wouldn't care about this type of control as well? I also think there's some inherent conflict in the S part of ESG investing. i.e. a truly socially responsible company would be returning most of its earning to the workers who actually did the work that earned that money, rather than funneling it to shareholders. Which makes those companies a bad investment, which means ESG funds that extended their S goals that far will fail and ESG funds that don't will get good returns for their investors and continue on - so by definition the S goal is limited.
- dragontamer 3y ago
  > It does make me wonder why non-esg large fund investors wouldn't care about this type of control as well? The main thing investors have been focused on in the last 30 to 40 years has been lowering fees, in particular "passive" investing which is based on very obvious metrics ahead-of-time. "Active" investors may have cared about these governance issues before, but their fees were just too high in practice. But I think we're seeing the blowback now as more-and-more companies come out with crap governance structures, knowing that they can take advantage of the easy-money from passive investors. I don't know if things will swing the other way. But ESG seems like a way to keep fees low but still have a degree of thought put into corporate politics. I'm not "bullish" on ESG btw. But I think its a step in the right direction, and I think that its a good thing that people are thinking about how to solve the issues that arose from this era of passive investing. Whether or not ESG truly solves the problem remains to be seen however.