What sort of investments should we be making?

By Nick Lyth

​Some of you may have heard me saying that ESG is a worthless concept.  Bankrupt.  It is the invention of corporate PR departments cloaking the harm their companies do with an incomprehensible mantle of decency.  What does ESG mean, even?  It is an acronym, not a word.  (“Environmental, Social and Corporate Governance”, for the many who still don’t know what it stands for.  Try explaining that in one sentence to a child, and see what you come up with.)

I also dislike the term, Ethical, when applied to investments.  Ethics?  This is the realm of classical Greek philosophy, not of the investment world, a world traditionally disassociated with ethics of any kind.  Ethics?  Really?  I don’t think so.  Profit, greed, ambition, yes.  Ethics, no.

“Responsible” is a word that gets us closer to a real connection between investment, business, and what both do for one another and to the rest of the world.  Responsible investing is possible as a workable concept.  Define “responsible”.  It’s a viable term, although your definition may be different from mine, and therein lies a problem.  It reaches the limits of its value as a communication in this context very quickly.

However, the word I want to suggest we start using now, is “positive”.  I can say that “every investment we make at Green Angel Syndicate is a positive investment, and that we only make positive investments” because we make investments in order to make a positive difference to the world we inhabit, not a negative difference.

I think this works best of all, because it is so easy for us all to agree on its meaning.  What are our positive values?  Can you not answer that question for me?  Here are a set of words.  Health, repair, improvement, endurance, tranquil, temperate, settled, comfortable. Life.  These are all words that are positive for you and for me, and for everyone around us.  Their opposites are all negative.  I don’t have to go through them for you.  Apply these words to whatever you choose – the weather, the climate, the landscape, the economy, the political world, community, religion, your own home, indeed your life – and you know they are all words that mean “good”.  Their opposites mean “bad”.

Now apply them to the investments you and I can make.  Investments in companies that promote a positive difference are good.  Investments in companies that promote a negative difference are bad.
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Let me put these blanket assertions into context.  Let’s look at the Footsie 100, and ask: positive or negative?  Here are the top ten companies calculated according to Market Capitalisation (i.e. the total value of its shares), with my judgement.  
I should stress, my judgement is subjective, ill-informed and highly coloured by my critical feelings for those in positions of power, and their failure to act soon enough to avert what has become a terrible, but wholly avoidable, threat to human life on the planet.  My judgements are therefore wholly fallible, but it’s worth asking, would you make the same judgement?

​Company	​Activity	​Judgement
​Royal Dutch Shell	​Oil & Gas extraction, refinement, processing and sale.	​One of the major culprits responsible for global warming.  Very negative indeed.
​HSBC Holdings	​Banking	​I don’t know enough about them.  That in itself suggests they have protected their reputation effectively.  I will say, Neutral.
​BP	​Beyond Petroleum, they say, but really?  No, their accounts tell us everything we need to know.  The same as Shell.	​Negative
​Glaxo Smith Klein	​Pharmaceuticals	​Making the world a better, healthier place, or exploiting demand for cures with over-priced, monopolistic, restrictive trade practices?  I suggest the latter.  Pharma has, quite rightly, a terrible reputation for ethical standards.  Negative
​British American Tobacco	​Consumer grocery (FMCG) brands, from soap powder to sausages, shampoos to ice cream.	​Unilever produces some of the brands that have been at the forefront of the consumerist society that did so much of the damage to the environment in the last 50 years.  Its sole purpose is to encourage excessive consumption of everything it can make.   It is not designed to satisfy basic needs, but to exploit greed. Negative.
​AstraZeneca	​Pharmaceuticals	​The same as for GSK.  Negative, it has to be.
​Diageo	​Alcoholic drinks brands	​Exploitative, or serving our needs?  I think Diageo sits somewhere in the middle, both positive and negative.  So, Neutral as well.
​Barclays	​Banking	​Barclays has an awful reputation, quite deservedly, and is doing everything it can to rescue its position.  I am afraid I would say, not enough yet, and so Negative, but I hope this will change.
​BHP	​Mining	​Inevitably, mining of all sorts of minerals has been tarred with the brush of coal mining.  Even though many forms of mining pre-existed coal mining, it became so much the largest mining sector, for such a long time, and so associated with our basic energy needs, that it’s hard not to make the connection.  In reality, BHP’s impact is sometimes bad, sometimes good, so Neutral.

It’s pretty bleak, in my estimation.  These are the biggest companies in the world, and they are not doing anything much good for the world, by the standard of Positive difference as against Negative difference.

I am going to save the next part of this argument for another day, but you might like to explore it for yourselves before I do.  What do you imagine these ten companies claim, in terms of their ESG policies and activities?  This is the term they all use to claim virtue in trading with responsibility and care.  It is useful for them, because it creates such a blur of meaning.  It hides the reality of “responsibility” and “care” behind the foxy acronym, that needs explaining before anyone really understands its significance.  Look for yourself, if you care to test my hypothesis, that these people are cynical, exploitative hypocrites.  I think you will find they all claim ESG to be part of their purpose.
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Meanwhile, stop investing in these companies, call them out, start asking about Positive Investment whenever investments are in question, and start making investments that you know are Positive.

Nick Lyth is Founder and Director of Green Angel Syndicate, the only angel investment syndicate in the UK specialising in the fight against Climate Change and Global Warming. For regular updates follow Green Angel Syndicate on LinkedIn and Twitter.