Some Holiday Season Thoughts On ESG And Impact Investing

Dec. 02, 2019 12:57 PM ETAAPL
Claudio Brocado profile picture
Claudio Brocado


  • ESG (environmental, social and governance) as well as impact investing are Wall Street‘s flavor of the week.
  • I too believe in investing only for the long term, so I that sense, our investments should be sustainable.
  • I pay a lot of attention to corporate culture, and consider corporate governance to be a component of culture.
  • Apple in particular is a stock to own long-term, as trading it more often than not just results in increasing one‘s tax bill.
  • Still, AAPL might be a great candidate to fund charitable giving through appreciated shares.

Why have I not officially adopted ESG investing? ESG (acronym for environmental, social and governance) has been broadly embraced by the financial industry, which I criticize in my book Against #shortermism. Wall Street tends towards a ‘flavor-of-the-week’ marketing approach, touting ever-changing investment themes.

While a vast majority (if not all) of my stocks would qualify for high ESG scores, my investment approach has long emphasized a particularly extended time horizon. My book explains the merits of long-term-focused corporate cultures. It discusses the relevance of corporate governance, a subset of the all-important culture in my own investment process.

It also argues that, in the long run, the interests of all stakeholders converge. The latter include employees, customers and, of course, shareholders. Over the long haul, no company can truly succeed if it neglects the interests of society at large, and if its practices are not long-term sustainable.

I am concerned about what I call the bubble in short-term environmental awareness. In my opinion, the focus should be on the very long haul. Fads tend to quickly fade away, and we should all strive to avoid extreme short-term swings in sentiment that may trigger a sharp subsequent reversal in the proverbial pendulum of awareness.

I remain committed to long-term investing, and the benefits to society I believe this can bring. In terms of ‘impact investing’, there are several schools of thought, and I lean to a particular variety of it. ESG investing generally involves avoiding stocks of companies that are deemed to cause damage to society.

So-called ‘sin’ stocks are often included in the list of securities to avoid. The poster child for this would be the tobacco and cigarette makers, but companies that are deemed to cause widespread damage (at least to the environment) often include those involved in fossil fuels as well.

I have tended not to personally own those kinds of stocks for multiple reasons. Still, proponents of the school of thought regarding impact investing that I also espouse would say it is not so much about your indirect impact through owning securities of companies that are well out of ESG compliance, but what you do more directly with your investment profits.

Because most of us are not investors of such a scale that can have any meaningful direct influence on the companies we may consider for investment or their management decisions, we can have more of an impact on society by using some of our investment gains to support worthy causes.

A specific idea on gratitude and generosity in this season of giving

With Thanksgiving just behind us, and the holiday season, It is the time of the year to realize how much there is to be thankful for, and to consider sharing the bounty. This holiday season may be a good opportunity for some to do something with Apple stock that may not have come to mind.

I always say that Apple (AAPL) is a stock not to trade, but to own for the long haul. Fortunate long-term holders of the largest US company, however, may well now have a problem of the ‘good to have’ variety. AAPL shares have appreciated so much this year that the company may now represent an extraordinarily large part of their portfolio.

To the extent Apple shareholders want to give to charities still this year, it may be a good idea to donate appreciated stock instead of cash.

This article was written by

Claudio Brocado profile picture
Seasoned financial professional with substantial corporate finance experience followed by well over twenty years in the financial industry (sell-side as well as over sixteen years buy-side, including firms such as RCM, Putnam, Fidelity and Batterymarch). Substantial global expertise and interest, complemented by formal studies in foreign languages and strong understanding of multiple cultures and intercultural communications. Starting 2014 spending my professional time researching and investing in global financial markets (developed and emerging).

Disclosure: I am/we are long AAPL. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

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