This blog is about investing for income and growth, and I’d like to get back to exploring new ideas in these areas soon. However, our ever-evolving society continues to interrupt my thought process. A couple of weeks ago, I posted the Kim Ng article, First Female GM in MLB, and now we have Nasdaq proposing a rule change to listing companies that would attach a new diversity mandate to their listing requirements. Click here: Nasdaq Defends Its New Diversity Mandate
Nasdaq is a stock exchange. Why do they want to arbitrate social justice? Is this even in their purview?
Only time will tell what happens to the Nasdaq proposal, but maybe we can get an idea of how changes similar to those proposed by Nasdaq have affected real-life companies’ performance in the past. If we look at Environmental, Social, and Governance (ESG) companies, we can see how they have performed over the last few years. Fidelity, Vanguard, and the like all have ESG funds with well-documented track records. I think you’ll find these funds have underperformed their counterparts, but more recently, they have matched, and in some cases, outperformed their benchmarks.
Our country has struggled with the problem of inequality for a long time. One noticeably lagging area is business. Besides the personal biases we all share, companies have a real cost to bear. Businesses are slow to spend on intangible and difficult to measure costs. The emphasis on diversity in corporate boards has gained strength in this covid era, and Main Street has pointed the finger at Wall Street and corporate America for its slow response.
Today’s cultural issues are filtering down into American business, whether we like it or not. The equality issue will be with us for a long time, and America will move forward with it. We are stronger than we know. Personally, it makes me feel uncomfortable, and I wish it would go away. But whether I like it or not, change is always present and inevitable; it’s part of the American landscape.
My hat’s off to the Nasdaq for taking a path less traveled. Maybe ESG funds should be a core part of our investing decisions.
Let’s do more research.