Aligning Investments with Values

“Value investing” has taken on a new meaning recently, one unrelated to the traditional distinction between value and growth stocks. The global investment firm BlackRock has made headlines this year with some dramatic statements. Its most recent announcement on March 2 spoke out against companies that make and distribute guns and firearms. It called out the three publicly traded companies in that industry and stated that none of its actively traded funds hold any stock in those companies. The BlackRock press release goes on to say, “we have reached out to our clients to help them understand their exposure to civilian firearms companies.” The implication is that if clients want to divest from firearms, BlackRock will be glad to help them do so.

This announcement comes on the heels of BlackRock’s public statements in January looking more broadly at socially responsible investing. BlackRock chief executive Laurence Fink sent a letter to corporate CEOs where he stated that businesses should make a positive contribution to society. If BlackRock pulls its support from companies that only focus on shareholder returns, those companies are likely to suffer. BlackRock holds large enough shares, through the 401(k) plans it manages, that its vote makes a difference.

I don’t have any personal stake in BlackRock. I have been a customer of Vanguard for twenty years. To better align my investments with my values, I chose to direct the Individual 401(k) for my business to Vanguard’s Social Index Fund. Investment companies solely devoted to socially conscious investing could have been better choices, but I admit that I instead took the easier path.

Vanguard’s Social Index Fund invests according to the FTSE4Good US Select Index. That index screens its investments based on specific social, human rights, and environmental criteria. Its investments emphasize financial and technology sectors, with healthcare not far behind. The index bans particular industries, such as weapons and tobacco, but does include exposure to the oil and gas industry.

Some people may argue that it is impossible to include oil and gas stocks in a socially responsible investing platform, but the reality is that society today relies on this industry to power our cities. Citizens still demand electricity and fuel, so the entire blame cannot be placed on the companies that provide this resource. Energy companies that produce fossil fuels while also promoting increased proportions of renewable energy may be worth supporting as being the best within their industry class. Oil and gas only make up 3 percent of the Social Index Fund’s holdings.

Investment firms can influence the oil and gas sector, however. An article in the New York Times highlighting BlackRock’s letter to CEOs mentions the pressure the investment firm put on Exxon. Its support of a 2017 shareholder proposal to require disclosure about climate risks certainly played a role in that passage of that proposal. Exxon has finally shifted its position on climate change. 

With major investment firms reconsidering their role in social responsibility, it is time for citizens to do the same. The cliché, “Put your money where your mouth is” has never seemed more appropriate.