Social Responsible Investing: MMM and Vanguard ESGV

Investing
#1

Link to article

Hello!
Hopefully this is an appropriate post. Not sure if chatting about other “Financial Folks” is allowed. Too gossipy? Let’s focus on the meat of the post rather than author or the offhand controversial opinion points in the article (Bill Gates for example).

Vanguard ESGV - I hadn’t heard of this, but am very excited it exists!

Definitely check out the link for an in depth look at what it is, more ethical thoughts, etc.

What do YOU think? Worth investing in? Just a fad? A band aid on a much bigger problem? Virtue signaling? Most importantly: is it safe to invest in? How should one split money between it and their target date index fund if wanting to invest?

Ps. Feel free to remove if other blogs are off limits, no hard feelings whatsoever, this is your empire!

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Socially responsible index funds + withdrawals
#2

Hey @Littlefrugalfam,

Yeah, I think it’s fair game!

First, I think it’s a great article. I’m 99% in agreement. If you go just by that article, I think you’re in great shape. If you want my take, here are my main thoughts:

  1. Socially responsible investing won’t have much if any impact on the share price of the “bad” companies. Even if HALF of all people become active socially responsible investors and don’t invest in the bad companies, I’m quite sure the other half of humanity would be more than happy to fill in the gaps, instantly returning the market back to “efficient” and having no measurable impact on the value of those companies. As a metaphor, think about taking a cup of water and deciding where to pour it into an olympic sized swimming pool. You don’t like the water over at one end? Walk to the other side and pour it in… everything is gonna even out because the market is efficient and your careful choosing of where you dump your water in didn’t make a difference. As MMM wisely pointed out in his article, if you actually want to have social impact, the much bigger impact is your spending decisions. Stop buying cigarettes, bike to work, buy organic, etc.
  2. I strongly question the implication that ESGV is likely to outperform the market. MMM was pretty hesitant to claim that with any confidence, but I just think there’s zero reasonable evidence that will be true going forward. Like the point above, the market is efficient. If socially responsible companies are more likely to outperform, money motivated investors will instantly move there and price that future out performance into the market. Looking backwards the out performance was just random, but we can’t count on that going forward. But this backs up the point about voting with your spending dollars. If everyone goes and buys solar, organic, whatever, THAT is what will move the market in favor of the socially responsible companies. Once it’s actually more profitable to own them (because their sales, profits and growth merit it) then the market will reflect that.
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#3

Great points! Thanks so much for your thoughts, makes total sense.

#4

Thank you so much for sharing this article. This is something I’ve thought about as I’d rather put my money into companies that align with my values. But I do like the point of basically “voting with your dollar” in terms of spending. Anyway, thanks for putting ESGV on my radar!

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