In June of 2023 we sold our last shares in public equity markets - we now own no stocks. We have received a bit of interest in this decision so we thought it might be helpful to put our thoughts down about how we arrived here.
The decision to stop investing in public equities was a multi year journey where we first attempted to find pockets of broadly positive social and climate returns through stocks only to become convinced that the underlying structures of the market make that - as far as we can tell - impossible.
Over the past five years we have worked to broaden how we assess investments. First starting with simple ESG style screens to where we are now working to understand the impacts our investments have on the broader stakeholders involved with a business. Thinking about people, planet, communities and equity are now key considerations for us as we assess any investment. It isn’t about financial returns in isolation and it isn’t about impact without consideration of the returns.
We also have come to believe through our experience that the financial industry, like many other industries, in chasing profits for their shareholders strives to create products that are higher fees for them and lower costs to manage. This leads to standardization of what is offered - boiling down investments to some generic flavor of a 65-35 stocks to bonds portfolio. These are far easier to manage than more complicated investments and the fees are steady. Remember - the finance industry is an industry with significant revenues and despite their “fiduciary” duty to you their primary accountability as a corporation is to the shareholders - not you.
This means that you shouldn’t expect much innovation in equitable finance because it drives up costs. This means movements like ESG investing will quickly be consumed by lightweight ESG funds that are primarily marketing. And that investing for impact becomes another marketing message without driving for deep, meaningful impact in the businesses. The financial industry will standardize on what we are asking for through their marketing messaging and not deep innovations that shift the industry toward stakeholders and away from the singular focus on shareholder returns.
In the next few posts we are going to share how ESG investing really doesn’t drive impact, how talking about concessionary returns misses the point, and how a focus on shareholder value as the primary goal of companies is ruining the world. We will also share how we have thought about constructing our investments differently and the types of investments that make sense.
We recognize that investing in the way we do takes a lot of time which not everyone has available to them. We also understand that there are some investments that aren’t open to everyone - something we believe is a problem with our system. We hope that by sharing different approaches to investing we can create more pathways for everyone to invest in building for the economy and planet that we and our children deserve.
More to come next week.
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