Socially Responsible Investing
On Wednesday 12th of February 2020, the EA Rotterdam group had their tenth reading & discussion group. This is a deeper dive into some of the EA topics.
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The topic for this event was Socially Responsible Investing
During the evening we discussed how we (as a society or as individuals/effective altruists) should think about investing.
Some questions/discussion starters were:
– Does divestment work? (i.e. pressuring Vanguard and other funds to not invest in fossil fuels/tobacco/firearms) (share price, stigma, boycott)
– Are returns on ‘responsible’ stocks not as good?
– What are even ‘responsible’ stocks or companies?
– Are the long-term (investor) returns for social companies better?
– Is investing even a good place to look for ‘impact’ as an effective altruist?
Here are the presentation, questions, reading materials, and my personal summary of the event.
If you want to visit an EA Rotterdam event, visit our Meetup page.
We started the evening with a presentation by Joeri. He introduced EA and the topic of Socially Responsible Investing. He left the rest of the presentation (our findings) to after the discussion.
We discussed if impact investing was a viable strategy to do good. We weren’t sure if the returns would be worse (some evidence does suggest so – as mentioned in the Founders Pledge article – but some others say the returns are the same).
One thing that is difficult to know/examine is what is meant by socially responsible (or sustainable) investing. You would say that sustainable investing should always be the norm, but it means something different in 3 years vs 30 years.
Divesting could work, but it seems difficult in open/large markets where someone else will buy the stock (at a discount). In smaller markets (e.g. coal) with tight capital, it might work.
The social advocacy and boycotting associated with (or separate from) divesting might even be a better strategy (e.g. if you buy less products of company X, they will more likely feel it than you divesting the stocks).
We heard about Best in Class investing (see here for more) “Best in class (ESG) investment refers to the composition of portfolios by the active selection of only those companies that meet a defined ranking hurdle established by environmental, social and governance criteria. Typically, companies are scored on a variety of criteria.“
There is relatively little (to no) information available about investing through an EA lense. Both for pension funds or personal (stock-picking) investing. This could be a very interesting topic to dive into.
I (Floris) personally invest about as much as I donate, so if I could have an impact there too, that would probably make quite a difference (versus just buying the ‘optimal’ basket of global stocks).
For others, it may be less of an option personally. But some pension funds and endowment funds are managed by only a few people, so these might be influenced by writing a well-reasoned letter! (go do that!)
On this topic, it’s probably also good to switch banks. It’s easy to do (takes about 1 hour now, and 1 hour over the next year to redirect some recurring payments/income). And makes sure your money gets invested a bit better (the money in your bank account/savings account that is).
For sustainable investing, we talked about Blackrock announcing this publicly (ESG article on their site). They were appearently not the first (so a laggard) to do this (but a big one nonetheless). It’s interesting to see some of the externalities being taxed (e.g. carbon tax) and so making sustainable investments (fewer externalities) being more lucrative/attractive.
If you look at the start of a business (start-ups), it might be smarter to invest at this stage and a place where you might be more likely to have an ‘informational advantage’.
We also touched upon the following:
- Investing to give later (could work) or give directly now (the more widely chosen option)
- Personal peer-to-peer funding (Crowdo)
- Should we have a list of companies to boycott? (or have one yourself), or categories to boycott?
It was another great discussion evening. We hope to see you at one of the next ones:
TO BE DETERMINED!
11 march social
8 apr put a number to life
6 may social
10 jun types of impacts
8 jul social
9 sep social (I will be awaY)
14 oct Longtermism
11 nov social
9 dec ALLFED
– https://www.youtube.com/watch?v=fno1QIuA6EQ (about sustainable investing – TED Talk)
– https://founderspledge.com/stories/impact-investing-executive-summary (Founders Pledge about (di)investing)
– https://www.youtube.com/watch?v=00Q3X0-Rihw (about sustainable investing – TED Talk)
– https://www.youtube.com/watch?v=590t-_g5wPU&list=PLwp9xeoX5p8M1U_QaFkzvJGC_3YAEpyBv&index=19&t=0s (EA Global 2019 video)
And even further reading/discussion: