The investment community has grown accustomed to the concept of socially responsible investing. Investors are increasingly placing greater emphasis on environmental, social and governance (ESG) investing criteria, choosing to put their money into companies whose values are aligned with their own.
But that hasn’t stopped companies from misbehaving. Take, for example, US aircraft manufacturer Boeing Co. The company has been in hot water since two of its 737 Max 8 aircraft crashed in Indonesia and Ethiopia, killing 346 people. All 737 Max 8 planes have since been grounded.
Initially, Boeing’s then CEO Dennis Muilenburg (he was fired in December) maintained there hadn’t been any technical issues that could be blamed on the company. But information that has unfolded over time seem to suggest wrongdoing on Boeing’s part. Recently released instant messages and emails sent by unnamed employees between 2015 and 2018 included this particularly memorable one: “This airplane is designed by clowns, who in turn are supervised by monkeys”.
Clearly then, Boeing has failed on the governance aspect of ESG.
And yet, analysts don’t seem all that bothered. According to MarketWatch.com, there are seven analysts recommending a ‘buy’ on Boeing stock, and one who has it at ‘overweight’. Another 14 are calling a ‘hold’ on the stock. Only one has a ‘sell’ recommendation.
Despite such transgressions, I remain optimistic about the outlook for ESG investing and the impact it will have on the overall investment community and the way executives manage their business. In part, it’s because conversations between asset owners, institutional investors and fund managers have moved from the “what is ESG investing?” of just a few years ago to “how do I integrate ESG practices into my investment processes?”
As we begin our journey into the new decade, all of us in the investment community – from asset owners right down to mom and pop investors – should play a bigger and more active role in responsible investing. Large investors with regular access to the top management of companies should make sure they are well managed in all aspects, and retail investors should let their “ESG voice” be heard loud and clear at annual general meetings.
