Is Facebook ESG?

Investment in Facebook by environmental, social and governance (ESG) funds shows the importance for investors to analyse what is contained in that fund. 

ESG funds generally had a screening process that disregarded companies involved in the production of tobacco or alcohol, manufacture or provision of gaming facilities, weapons or armaments, pornography, mining of uranium for weapons, and thermal coal and oil sands. 

However, Facebook does not break any of these requirements, but actions by the company could be ethically contradictory to what investors wanted to invest in. 

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The most recent example was The Wall Street Journal had reported that Facebook executives had thwarted efforts to minimise misinformation and make the social media site less divisive. 

Facebook chief executive, Mark Zuckerberg recently also said the company would not directly censor posts and criticised companies like Twitter for doing so. 

Twitter chief executive Jack Dorsey drew the ire of US President Donald Trump, after the social media company added a disclaimer to one of the President’s posts for misinformation, and later another for glorifying violence. 

Big tech firms in the US, like Facebook, Alphabet, Microsoft and Apple, had become popular options for ESG funds because those companies offered high returns while adhering to ESG screening criteria. 

Simon O’Connor, Responsible Investment Association Australasia (RIAA) chief executive, said the actions of social media companies had been strongly scrutinised by some responsible investors. 

“Some of whom have decided to exclude these companies from their portfolios on the grounds that they have been publishing and distributing offensive content or not taking responsibility for inflammatory and offensive content,” O’Connor said. 

O’Connor said other members of RIAA had driven global engagements with social media and tech firms to force them to strengthen controls on distribution of objectionable content.  

“NZ Super for example has convened an investor alliance of over 100 investors who manage over US$7.5 trillion ($10.9 trillion) of assets under management to put pressure on Facebook, Alphabet and Twitter as a result of the Christchurch massacre in 2019,” O’Connor said. 

“These issues have again raised their heads in the context of the US protests and President Trump’s social media posts, that will result in close scrutiny of the actions of these big social media companies by responsible investors.  

“Ultimately, these big companies risk doing massive damage to their social licence if they are failing to take actions to prevent massively damaging content and false information to be spread via their platforms.”  

According to FE Analytics, within the Australian Core Strategies universe, there were six ethical/sustainable funds that invested in Facebook. 

ESG funds with exposure to Facebook 

Fund

Percent weighting to Facebook

Pendal Sustainable International Share

2.11%

Australian Ethical International Shares

1.9%

Vanguard Ethically Conscious International Shares Index

1.52%

Vanguard International Shares Select Exclusions Index

1.33%

Dimensional Global Sustainability Trust Unhedged

1.15%

UBS IQ MSCI World ex Australia Ethical ETF

1.3%

Source: FE Analytics




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It is difficult to see if Australia Ethical is rigged to the MSCI.
ESG had evolved long before the Riaa woke up last year to responsible investors.

Keep it simple, Facebook would not pass the pub test logic in any discussion no matter what level of ESG understanding or interpretation people may have

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