Socially Responsible Investing is BS

Socially Responsible Investing is BS Curreen Capital
Published on Aug 3, 2016

Socially Responsible Investing (SRI) combines investing with doing good – what’s not to like? Well… a few issues crop up when implementing SRI. As they say: many a slip twixt cup and lip.

Morningstar Investment Conference: Using Annuities In A Portfolio For Added Stability

portfolioOver the past decade, annuities have fallen out of favor with investors. These retirement products became popular in the US during the Great Depression when potential retirees were looking for a secure income stream that would be unaffected by stock market volatility. Q2 2020 hedge fund letters, conferences and more If you’re looking for value Read More


0:03I’m out and I’m talking to somebody cool
0:05and they inevitably say, oh, you’re an investor.
0:09You must be into socially responsible investing.
0:12And I say, no.
0:16Actually, I don’t like socially responsible investing,
0:20as, you know, capital letter SRI.
0:22I don’t like ESG, the Environmental, Social,
0:25and Governance focus investing.
0:28And, it’s not because these are bad things,
0:30it’s not because I’m out there, you know,
0:32clubbing seals after work, like, that’s not what I’m into.
0:35The reason is, I think that people all too often
0:37wrap themselves in these flags of ethical/moral,
0:41and they use it to charge
0:43excessive fees for mediocre products,
0:47and worse than that, the people who get,
0:50you know, caught in these sort of traps,
0:52these sort of mediocre investments,
0:55are the good people, are the people with good hearts,
0:58good intentions, who want to make the world a better place.
1:01And it makes me mad, it riles me up,
1:04that you’re, you’re trapping the best people.
1:09Mmm. Anyways.
1:11So, what’s my beef with SRI?
1:13So, first off, what does it mean
1:15to invest socially responsibly?
1:17I know what it means.
1:18You know what it means.
1:20The labor unions know what it means.
1:22The religious groups know what it means.
1:24The environmental groups know what it means.
1:26But, they’re all different.
1:29We all have these different takes on it.
1:32And, if you’re into digital privacy,
1:33you’ve got a completely different take on it,
1:35and you won’t touch any of the stuff
1:36that the socially, the normal SRI funds are into.
1:40So, it’s like yes, there are things that I will not touch,
1:44there are things that I think are wrong
1:47and should be removed from this earth,
1:51but what I think doesn’t line up exactly with what you think
1:55and it becomes very difficult when we try
1:57to make an investment vehicle that follows
1:59the right path when it’s so difficult to know,
2:03what is the right path?
2:05So, that’s the first problem.
2:07Second problem are the fees.
2:09Because you’ve got a Vanguard fund
2:12that tracks a socially responsible index.
2:15You’ve got a BlackRock ETF
2:16that tracks a socially responsible index.
2:18But, my guess is, if you’re pitched
2:20one of these socially responsible funds,
2:22you were not pitched the Vanguard fund or the BlackRock ETF.
2:26You were pitched a fund with fees
2:29maybe one or one and a half percent above those every year.
2:33And, I’m not opposed to high fees,
2:36(I actually have a fund with high fees)
2:39I’m opposed to high fees when you don’t get value in return.
2:44So, high fees should only be accompanied by
2:47returns that exceed those of the index,
2:51otherwise why the heck are you with those things?
2:53And so the Vanguard fund
2:55seems to lag the S&P by a little bit.
2:58The BlackRock ETF actually seems to be pretty darn close,
3:01but they’re not beating the index
3:04by on return basis,
3:07so the value of our investment
3:09into socially responsible has to be made up somewhere else,
3:12so it’s in the fact that we are effecting positive change
3:16or maybe with the Hippocratic Oath,
3:19at least not doing evil.
3:21Like, we’re not making the world a worse place
3:23through our investment.
3:25My issue with these high fee funds
3:27is that, like, okay, I’m getting worse returns
3:31and where does my invested money,
3:34where does my investment
3:35into making the world a better place go?
3:38And I worry that some of it goes into a townhouse
3:42in San Francisco, or to pay for somebody’s boat,
3:46or, you know, private jets to fly around
3:48and give seminars about how good you can be
3:51if you invest in these things.
3:53And that just doesn’t strike me
3:55as the best way to put money towards
3:59making the world a better place.
4:02So, that goes sort of into my third idea
4:05which is that I don’t want to combine investing
4:10with making the word a better place with my money.
4:14I think when you put those two things together
4:16you get this sort of unpleasant compromise
4:19that doesn’t do either job
4:21as effectively as it could.
4:23So, I think if you want to make the world a better place
4:27you go into investing, you do that purely,
4:31you don’t buy stuff that makes you feel, you know, ill.
4:34But, you do a good job investing.
4:36And then you take the profits of that investing
4:40and you make the world a better place
4:42with targeted investments.
4:43So, what do you do with this investment framework
4:45if you want to do good?
4:46A, if it’s you, investing in stocks yourself,
4:49don’t buy stuff that makes you feel sick.
4:52Don’t be a part of something that you think is evil.
4:56B) if you have an investment manager,
4:57not only should they be someone you can trust
5:00to work on your behalf,
5:02and someone who knows what they’re doing,
5:05and actually can beat the market after their fees,
5:07but you also want to know that they have
5:09some sort of moral compass that
5:10you can feel good that, you know,
5:12they’re out there investing your money,
5:15not in stuff that will make you ill
5:18if you find out about it.
5:20C) but, for 95% of us, what should we do?
5:23Well, not me, because I’m in camp number one,
5:24but, so 95% of the people,
5:26what should they do,
5:27if they’re in an index fund?
5:30Like I said, take that money that you save
5:32by being in a low cost index fund
5:34and not, you know, subsidizing somebody’s lifestyle,
5:37even if they’re also progressive,
5:39you don’t have to subsidize their lifestyle,
5:43take that money that you saved
5:45and put it to good use.
5:46Like, calculate, okay, one percent of my money every year
5:51is being saved because I’m in this low cost fund.
5:54I’m going to take one percent of my money
5:56and I’m going to donate it to X charity,
5:58or X number of charities.
6:00Or, I’m going to install stuff that makes my life better
6:03like LED light bulbs everywhere in my house.
6:05Something that makes the world
6:06a little bit of a better place.
6:07Do that.
6:09That’s pure, that’s clean.
6:10Then you have solid returns
6:12and you’re making a positive influence,
6:15a positive impact in the world.
6:17You’re effecting positive change.
6:18You’re doing well.
6:20You don’t have to do that
6:21by buying this mediocre compromise of investment
6:26plus doing good.
6:29Like, you can vote with your dollars elsewhere directly.
6:34You don’t have to do it as part of your investment scheme.
6:37So, those are my thoughts on SRI investing.
6:41Why it makes me a little bit mad.
6:43Please leave a like
6:45and please leave some comments below.
6:49I read all of them and I do want to know what you think.
6:51Thank you so much.
6:52Also, after all this talk,
6:55I have to go donate some money to charity
6:57because I’m not a hypocrite.