ESG investing is a popular theme today.  It involves allocating investment capital to companies that operate on policies of Environmental, Social & Governance (ESG) principals fitting progressive, liberal, socialist, or woke criteria or values.  These policies are often put ahead of earning profits. For profit corporations exist to make money for their shareholders.  They have an obligation to act lawfully and ethically, but other than that, their responsibility is to the shareholders.  Other “stakeholders”, be they employees, customers, communities, nations, etc. should only have their wishes considered to the extent doing so has a direct or indirect benefit to the profitability and growth of the company.

That said, in the absence of a directive by the client, any Fiduciary Advisor with the power to invest in, or influence or vote shares in a company supporting ESG, Equity, or Affirmative Action, without being able to draw a direct line on how that vote or initiative specifically benefits that company, is in violation of their fiduciary duty.  Failure to put the best person in a job, taking actions to reduce sales or revenue, or increasing costs in the pursuit of ESG policies, have no direct benefit for the company, and is rarely if ever, in the interest of the investor.

The Bottom Line:  Fiduciaries have the obligation to put the investors interests first.

–Michael Ross, CFP®