CHAPTER 8

Public Equities: Select Values-Aligned Investments

DIG DEEPER

Tools to Research Individual Companies

COMPANY RATINGS

The following websites rate hundreds or thousands of companies based on their ESG behaviors. Each lays out their own measurement criteria.

MSCI ESG scores over 8,500 companies and 680,000 financial products from around the world. The ratings are presented as grades that range from AAA (leaders) to CCC (laggards). The site shows how a company has ranked over time as well as areas where a company is leading or lacking.

Arabesque S-Ray rates over 7,000 global companies daily, providing two ratings. One is derived from ESG criteria. The second scores the company’s human rights, labor, environmental, and anti-corruption practices.

Just Capital ranks over 800 companies using a proprietary process that gives highest weight to workers’ rights, followed by customer, community, environmental, and shareholder concerns.

Yahoo Finance provides separate environmental, social, and governance scores for corporate entities. It also provides a Controversy score, which depicts the company’s involvement in negative ESG incidents (such as using child labor in their supply chain or not responding to an oil spill).

EXCLUSION LISTS

A growing number of organizations are developing exclusionary lists, which highlight companies that are considered to be behaving badly by social and environmental metrics.

Racial Justice Exclusion List. A relatively new player, this list includes companies involved in prisons, immigration detention, surveillance, and occupied territories.

Human Rights Campaign. This website lets you search listings of companies, municipalities, and healthcare facilities to determine how well these entities support LGBTQ employees.

Force the Issue. This site, currently listing over 3,500 companies, tells you whether a company requires forced arbitration for sexual harassment charges. Clicking the link opens a page that explains the issue. Dive further into the website for a searchable database.

CSR REPORTS

Corporate Social Responsibility (CSR) is a form of corporate self-governance. It refers to socially responsible policies, initiatives, and activities that a private company carries out on behalf of shareholders. Many companies produce CSR reports on an annual basis.

GRI Sustainability Database allows you to download CSR reports from nearly 15,000 companies. While these reports can shed light on a corporation’s intentions, keep in mind that the companies are self-reporting and have a strong incentive to show themselves in the best light possible.

Stock Fund Research Tools

As You Sow Invest Your Values. This easy-to-use tool is one of Janine’s favorites. Use it to scrutinize over 3,000 of the best-known mutual funds and ETFs to determine their standing across seven themes: fossil fuels, deforestation, gender equity, civilian firearms, military weapons, prison industrial complex, and tobacco.

Natural Investments Heart Rating. To be included on this site, a fund has to have an explicit socially-responsible mandate. Fewer than 200 funds are currently listed.

Morningstar. Morningstar scores over 21,000 mutual funds and ETFs. When you research a fund by entering its ticker at Morningstar.com, you can find the sustainability ratings under the “Portfolio tab”. If you want to know more about how to use this tool, watch the What Your Stock Fund Holds video, which you can find in the TAKE ACTION section of CHAPTER 7.

Schwab Socially Conscious Funds List. A comprehensive list of fixed income and public equities funds broken down by type. Among public equities, the list includes funds of different market cap sizes, geographies, and value/growth, as well as target-risk and target-date options.

US|SIF. This website enables a quick scroll through the mutual funds and ETFs offered by the members of the US Forum for Sustainable and Responsible Investing. Compare returns and expense ratios, download proxy-voting records, and get a sense of a fund’s ESG investing strategy.

Independent Web Search

Since ESG investing is gaining so much traction, a growing number of websites provide lists of what they believe are the best companies to invest in. Here are a few to get you started. Note: Don’t rely solely on one site’s recommendations. Do your own research. Also, be careful to understand the possible biases of the person or organization giving investment advice.

INDIVIDUAL STOCKS

Investor Business Daily: Top ESG Stocks in 2020

AlphaSense: 10 Top Rated ESG Stocks to Watch in 2021

Nasdaq: 5 ESG Stocks to Make the Most of the Bull Run in 2021

STOCK FUNDS

Kiplinger: 15 Best ESG Funds for Responsible Investors

ETF.com: Socially Responsible ETF Overview

Morningstar’s Sustainable Fund Landscape in Six Infographics. This site has a lot to say about the state of values-aligned investing in public equities. Open the link and scroll to the bottom to request a copy of the 2019 Sustainability Landscape Report. It contains a wealth of information, including a table at the end that names each fund and lists its type, Morningstar ranking, Morningstar sustainability rating, and carbon footprint.

ROBO-ADVISORS

DoughRoller: Best Socially Responsible Investing Robo Advisors. The linked page starts with Earth Day, but scroll down for Chris Muller’s research and opinion on the topic of Robo Advisors. Know that DoughRoller may receive compensation from some of the companies mentioned, so always validate the provided information with your own research.

Betterment’s Socially Responsible Rationale and Approach. Betterment explains how they built three socially responsible investing portfolios.

Ellevest: Creating Ellevest Impact Portfolios. Open this link for an article outlining the thinking behind Ellevest’s Impact Investing portfolios. The site as a whole provides great information through the lens of the female investor.

Chapter References

GENERAL INFORMATION

Archive of Articles by Jon Hale, Ph.D., CFA, and Head of Sustainability Research for the Americas at Morningstar. Jon is a prolific and extremely knowledgeable writer on the subject of values-aligned investing, particularly as it pertains to the public equities market. He also posts regularly on Medium and Twitter.

TARGET-RISK AND TARGET-DATE FUNDS

These types of funds are often offered through retirement plans because they hold a broad range of the market and are easy to buy and forget. At the end of 2016, 21% of the assets under management in 401(k) plans were invested in target-date funds. The two quick reads below explain what they are and how they work.

Target date funds vs. Balanced funds This Medium article explains the accepted benefits of target-risk and target-date funds.

What We’ve Learned About Target-Date Funds, 10 Years Later  This Wall Street Journal article looks at both the pros and potential pitfalls of relying solely on Target Date funds.

MOVING TOWARD ESG SCORING STANDARDS

ESG scores have not yet been standardized. This results in discrepancies between rating agencies. However, we may be getting closer to a standard. This series of articles provide insights into this important issue.

Is Tesla or Exxon More Sustainable? It Depends Whom You Ask In this Wall Street Journal article, MSCI, Sustainalytics, and FTSE Russell create ESG scores for the same five companies, with quite different results. Until standards emerge, the burden is on investors to analyze results and determine what factors they consider most important.

Investing in a Sustainable Future. Morningstar is a great source of sustainability research and information. Learn how Morningstar created their sustainability metrics through this link.

Demystifying ESG: Its History & Current Status Check out this lengthy piece posted by Forbes to geek out on the history of ESG ratings and the current state of play.

Can we finally standardize ESG standards? This Harvard Business Review article describes how ESG standardization has recently accelerated and explains why it is such a complicated challenge.

Climate TRACE This exciting development is an international initiative is striving to provide public information on carbon emissions from sites around the world. Climate TRACE could go a long way to standardizing environmental information for ESG rating agencies.

SHAREHOLDER ADVOCACY

The Shareholder Advocacy section in Chapter 8 was written by Andy Behar, CEO of As You Sow. Given the constraints of print, we were not able to include his entire piece in the book. You can find the full article here. If this topic is of interest, Andy’s book, The Shareholder Action Guide: Unleash Your Hidden Powers to Hold Corporations Accountable, is highly recommended.

Proxy Voting Guidelines provided by As You Sow help give guidance in voting proxies. In addition, a yearly report provides in-depth analysis and expert insight on hundreds of social and environmental resolutions. It is almost certainly the best source of information out there on these topics.

2020 As You Sow Shareholder Impact Review. To learn more about why we so strongly recommend As You Sow, this report outlines the incredible results of their shareholder advocacy in 2020.

CHAPTER 8

Public Equities:
Select Values-Aligned Investments

DIG DEEPER

Tools to Research Individual Companies

COMPANY RATINGS

The following websites rate hundreds or thousands of companies based on their ESG behaviors. Each lays out their own measurement criteria.

MSCI ESG scores over 8,500 companies and 680,000 financial products from around the world. The ratings are presented as grades that range from AAA (leaders) to CCC (laggards). The site shows how a company has ranked over time as well as areas where a company is leading or lacking.

Arabesque S-Ray rates over 7,000 global companies daily, providing two ratings. One is derived from ESG criteria. The second scores the company’s human rights, labor, environmental, and anti-corruption practices.

Just Capital ranks over 800 companies using a proprietary process that gives highest weight to workers’ rights, followed by customer, community, environmental, and shareholder concerns.

Yahoo Finance provides separate environmental, social, and governance scores for corporate entities. It also provides a Controversy score, which depicts the company’s involvement in negative ESG incidents (such as using child labor in their supply chain or not responding to an oil spill).

EXCLUSION LISTS

A growing number of organizations are developing exclusionary lists, which highlight companies that are considered to be behaving badly by social and environmental metrics.

Racial Justice Exclusion List. A relatively new player, this list includes companies involved in prisons, immigration detention, surveillance, and occupied territories.

Human Rights Campaign. This website lets you search listings of companies, municipalities, and healthcare facilities to determine how well these entities support LGBTQ employees.

Force the Issue. This site, currently listing over 3,500 companies, tells you whether a company requires forced arbitration for sexual harassment charges. Clicking the link opens a page that explains the issue. Dive further into the website for a searchable database.

CSR REPORTS

Corporate Social Responsibility (CSR) is a form of corporate self-governance. It refers to socially responsible policies, initiatives, and activities that a private company carries out on behalf of shareholders. Many companies produce CSR reports on an annual basis.

GRI Sustainability Database allows you to download CSR reports from nearly 15,000 companies. While these reports can shed light on a corporation’s intentions, keep in mind that the companies are self-reporting and have a strong incentive to show themselves in the best light possible.

Stock Fund Research Tools

As You Sow Invest Your Values. This easy-to-use tool is one of Janine’s favorites. Use it to scrutinize over 3,000 of the best-known mutual funds and ETFs to determine their standing across seven themes: fossil fuels, deforestation, gender equity, civilian firearms, military weapons, prison industrial complex, and tobacco.

Natural Investments Heart Rating. To be included on this site, a fund has to have an explicit socially-responsible mandate. Fewer than 200 funds are currently listed.

Morningstar. Morningstar scores over 21,000 mutual funds and ETFs. When you research a fund by entering its ticker at Morningstar.com, you can find the sustainability ratings under the “Portfolio tab”. If you want to know more about how to use this tool, watch the What Your Stock Fund Holds video, which you can find in the TAKE ACTION section of CHAPTER 7.

Schwab Socially Conscious Funds List. A comprehensive list of fixed income and public equities funds broken down by type. Among public equities, the list includes funds of different market cap sizes, geographies, and value/growth, as well as target-risk and target-date options.

US|SIF. This website enables a quick scroll through the mutual funds and ETFs offered by the members of the US Forum for Sustainable and Responsible Investing. Compare returns and expense ratios, download proxy-voting records, and get a sense of a fund’s ESG investing strategy.

Independent Web Search

Since ESG investing is gaining so much traction, a growing number of websites provide lists of what they believe are the best companies to invest in. Here are a few to get you started. Note: Don’t rely solely on one site’s recommendations. Do your own research. Also, be careful to understand the possible biases of the person or organization giving investment advice.

INDIVIDUAL STOCKS

Investor Business Daily: Top ESG Stocks in 2020

AlphaSense: 10 Top Rated ESG Stocks to Watch in 2021

Nasdaq: 5 ESG Stocks to Make the Most of the Bull Run in 2021

STOCK FUNDS

Kiplinger: 15 Best ESG Funds for Responsible Investors

ETF.com: Socially Responsible ETF Overview

Morningstar’s Sustainable Fund Landscape in Six Infographics. This site has a lot to say about the state of values-aligned investing in public equities. Open the link and scroll to the bottom to request a copy of the 2019 Sustainability Landscape Report. It contains a wealth of information, including a table at the end that names each fund and lists its type, Morningstar ranking, Morningstar sustainability rating, and carbon footprint.

ROBO-ADVISORS

DoughRoller: Best Socially Responsible Investing Robo Advisors. The linked page starts with Earth Day, but scroll down for Chris Muller’s research and opinion on the topic of Robo Advisors. Know that DoughRoller may receive compensation from some of the companies mentioned, so always validate the provided information with your own research.

Betterment’s Socially Responsible Rationale and Approach. Betterment explains how they built three socially responsible investing portfolios.

Ellevest: Creating Ellevest Impact Portfolios. Open this link for an article outlining the thinking behind Ellevest’s Impact Investing portfolios. The site as a whole provides great information through the lens of the female investor.

Chapter References

GENERAL INFORMATION

Archive of Articles by Jon Hale, Ph.D., CFA, and Head of Sustainability Research for the Americas at Morningstar. Jon is a prolific and extremely knowledgeable writer on the subject of values-aligned investing, particularly as it pertains to the public equities market. He also posts regularly on Medium and Twitter.

TARGET-RISK AND TARGET-DATE FUNDS

These types of funds are often offered through retirement plans because they hold a broad range of the market and are easy to buy and forget. At the end of 2016, 21% of the assets under management in 401(k) plans were invested in target-date funds. The two quick reads below explain what they are and how they work.

Target date funds vs. Balanced funds This Medium article explains the accepted benefits of target-risk and target-date funds.

What We’ve Learned About Target-Date Funds, 10 Years Later  This Wall Street Journal article looks at both the pros and potential pitfalls of relying solely on Target Date funds.

MOVING TOWARD ESG SCORING STANDARDS

ESG scores have not yet been standardized. This results in discrepancies between rating agencies. However, we may be getting closer to a standard. This series of articles provide insights into this important issue.

Is Tesla or Exxon More Sustainable? It Depends Whom You Ask In this Wall Street Journal article, MSCI, Sustainalytics, and FTSE Russell create ESG scores for the same five companies, with quite different results. Until standards emerge, the burden is on investors to analyze results and determine what factors they consider most important.

Investing in a Sustainable Future. Morningstar is a great source of sustainability research and information. Learn how Morningstar created their sustainability metrics through this link.

Demystifying ESG: Its History & Current Status Check out this lengthy piece posted by Forbes to geek out on the history of ESG ratings and the current state of play.

Can we finally standardize ESG standards? This Harvard Business Review article describes how ESG standardization has recently accelerated and explains why it is such a complicated challenge.

Climate TRACE This exciting development is an international initiative is striving to provide public information on carbon emissions from sites around the world. Climate TRACE could go a long way to standardizing environmental information for ESG rating agencies.

SHAREHOLDER ADVOCACY

The Shareholder Advocacy section in Chapter 8 was written by Andy Behar, CEO of As You Sow. Given the constraints of print, we were not able to include his entire piece in the book. You can find the full article here. If this topic is of interest, Andy’s book, The Shareholder Action Guide: Unleash Your Hidden Powers to Hold Corporations Accountable, is highly recommended.

Proxy Voting Guidelines provided by As You Sow help give guidance in voting proxies. In addition, a yearly report provides in-depth analysis and expert insight on hundreds of social and environmental resolutions. It is almost certainly the best source of information out there on these topics.

2020 As You Sow Shareholder Impact Review. To learn more about why we so strongly recommend As You Sow, this report outlines the incredible results of their shareholder advocacy in 2020.