I’ve long been a skeptic of so-called socially responsible ESG (Environmental, Social, and Governance) investing. While I strive to be socially responsible, I’m not prepared to outsource my value judgments to others, particularly to people who work on Wall Street. For me, that would be akin to asking gangster Meyer Lansky for moral guidance as to what Las Vegas casinos I should invest in. Sorry, I don’t perceive public companies paying CEOs tens of millions of dollars as being focused promoting the greater good.
I didn’t think my longstanding skepticism could sink any lower until I read this Bloomberg story about ESG funds holding some $40 billion in Russian foreign-currency debt that’s at risk of default. According to Bloomberg, ESG investors face potentially deep losses because of their financial support of Putin’s war machine.
“In light of current events it is clearly unacceptable that Russian sovereign bonds should be listed in ESG funds,” admitted Peter Uhlenbruch, interim director of financial sector standards at ShareAction, a London-based nonprofit that advocates for responsible investment. “Given that Russia was already under international sanctions for its annexation of Crimea, it’s certainly legitimate to ask why these bonds were in ESG funds in the first place.”
Sasja Beslik, the former head of sustainable finance at Bank J Safra Sarasin AG who recently joined Denmark’s PFA pension fund, put a finer point on the situation: ESG funds helped “finance the build-up of a war chest in Russia since 2014.”
Even prior to Putin’s invasion of Ukraine, I would never have invested in Russian companies, let alone the country’s sovereign debt. Indeed, years ago when I had my PR firm, I had an opportunity to do business with a Russian organization that would have resulted in some great introductions to influential businesspeople in that country. I declined because I wasn’t comfortable with Russia’s business practices.
I also wouldn’t invest in China or Chinese businesses, as I don’t want to support a country whose leader for life is on record as saying he wants to rule the world.
ESG investors have no problem supporting China. In fact, Elon Musk, whose Tesla is the 5th largest holding in Vanguard’s ESG fund, has nothing but high praise for China’s Communist leadership and what they’ve accomplished. Musk is playing a critical role helping China develop its electric vehicle industry and gaining competitive and strategic advantages over the U.S.
Another significant Vanguard ESG holding is Disney, which the Harvard International Review in October declared is “in China’s pocket” for voluntarily complying with the country’s censors. Admittedly, so do the other major Hollywood studios. Disney also operates a theme park in Shanghai, whose opening was huckstered live by ABC News’ Robin Roberts.
Disney CEO Bob Chapek recently pledged $5 million to support LGBTQ rights organizations, caving into protests from employees and others because of his initial silence on Florida’s legislation prohibiting lessons about sexual orientation from kindergarten to third grade.
“I truly believe we are an infinitely better and stronger company because of our LGBTQ+ community,” Chapek said in an email to employees. “I missed the mark in this (Florida) case but am an ally you can count on – and I will be an outspoken champion for the protections, visibility, and opportunity you deserve.”
Chapek and Disney employees apparently aren’t troubled by China’s banning of gay themes in film and TV or the targeting of individual activists and groups. Being gay in Florida is still much preferable to being gay in China.
My previous skepticism of ESG investing can be found here and here.
San Francisco’s Misguided Politics
San Francisco’s politics have always been over-the-top. Increasingly, they are garnering international attention, underscored by this August 28, 2021, headline in the Economist: “Why San Francisco’s politics are so dysfunctional.”
Here’s the latest from SFO, as reported by the publication Mission Local: San Francisco has instituted boycotts of 28 states and companies that are headquartered in them. Details were disclosed in a March 4 memo issued by City Administrator Carmen Chu.
It all began with the passing of an ordinance limiting travel to states with repressive anti-LGBTQ+ laws. Then it was expanded to states with anti-abortion laws. Then states that allegedly engage in voter suppression. The list keeps growing.
Mission Local doesn’t see the boycotts as a good thing, as it’s driving up San Francisco’s costs without any proof that it’s having any positive impact.
“It will come as little surprise to anyone familiar with the M.O. of San Francisco government that we have no tests nor audits nor analysis nor methodology to determine if our travel bans or boycotts are making any difference for the good,” writes author Joe Eskenazi.
According to City Administrator Chu, “No city has reached out to say they want to mirror our rules.”
Gee, I can’t image why.
Tesla Model 3 Ownership Cost Reward
Congratulations, Elon Musk! His Tesla Model 3 was named by Kelley Blue Book as the 2022 lowest 5-year cost to own in the electric luxury vehicle category. The 5-year cost when insurance, maintenance costs, fuel costs, and depreciation are factored in: $48,233.
It’s a nice award but looking at the 5-year cost of owning some other great cars costing significantly less than the Model 3 (starting price $45,000) one can appreciate why electric vehicles are unaffordable to most Americans.
The Honda Accord (MSRP $26,120) has a 5-year cost of $38,713, the Subaru Outback (MSRP $27,145) has a 5-year cost of $43,973, and the Lexus UX (MSRP $34,225) has a 5-year cost of $46,424.
What drives up the cost of owning a Tesla? Insurance. According to NerdWallet, Tesla Model 3 insurance costs an average of $2,215 a year, or about $185 a month. That’s about 40 percent higher than the national average cost of car insurance.
Musk’s disruptive brilliance never ceases to amaze. Tesla is offering insurance in Arizona, California, Illinois, Ohio, and Texas and plans to expand in Oregon and Virginia. Musk said on a conference call in October 2020 that Tesla planned to build “a major insurance company” which ultimately could account for up to 40 percent of the company’s auto business.
If buying a Tesla means blowing up the car insurance industry, where do I sign up?