There's a hot new investing trend that's taking over Wall Street. It has nothing to do with fundamentals... technicals... charts... or, oddly enough, even making money... And it could change the way Wall Street works and businesses are run... forever. It's all about "feel good economics." Little Engine That CouldYou may recall a little news story from a few weeks ago that sent shock waves across the energy industry. Activist investors are determined to tackle climate change and other environmental, social and governance (ESG) issues by getting themselves on company boards. They reckon to change company behaviors and business practices from the inside out. The now infamous activist hedge fund called Engine No. 1 managed to get three spots on Exxon Mobil's board of directors. With those seats, it will hold the company accountable for its role in climate change and force the business to reduce its emissions. And this week we learned that the fund has big plans to get average investors involved in transforming public companies. The little fund that could launched an activist investor ETF with the ticker VOTE. The Engine No. 1 Transform 500 ETF will invest in 500 of the largest U.S. companies. It aims to "instigate positive change for employees, customers, communities and the environment." According to managing director Michael O'Leary... Our idea with this product was, let's be ESG investors, not by what we hold, because we're just holding the 500 largest companies by market cap. Instead, let's be ESG by what we do as active owners. Because of this fund, we will now be long-term, nearly permanent owners of the 500 largest companies in America. | | |
The fund also tries to lure investors in with a super-low expense ratio of just 0.05%. Here's why this is notable... There's been a surge in interest in ESG investing because investors - especially younger ones - want to support companies with missions that align with their values. For example, funds that focus on ESG investing brought in $21 billion of investor capital in the first quarter of 2021, compared with $51 billion in all of 2020 and just $21.4 billion for all of 2019. But this new fund is different. While other ESG funds invest in companies that align with investor causes, this one will use shareholder power to vote for change in support of climate and other ESG issues. Now, Andy is on record saying that if you don't agree with what a company is doing, you should own it and change it from the inside. But we'd be foolish not to recognize that this sort of "feel good," activist investing will have huge ramifications for how companies do business... and what companies must do to survive the onslaught. And we're already seeing it distract from fundamental economic issues... The SEC has yet again punted on approving the first-ever U.S. Bitcoin ETF. When it comes to one of the most transformational asset classes we've ever seen... the SEC can't make up its mind on the kind of access investors should have to it. Instead, it's putting out statements about ESG... and requiring companies to disclose how they're addressing climate issues in their filings. And don't get us started on the Fed... Its dual mandate of controlling inflation and the unemployment rate has run into a few issues... Yet a quick look at one of its sites shows it has time to concern itself with climate change and social issues. As Andy has said... big changes are coming to the markets thanks to this new form of activism... and that means we need pay close attention and invest with our eyes open. The price of lumber has fallen 50% from its highs. Inflation is dead, the headline writers declare. If only it were that simple. There's a much bigger issue at play... one far too deep for those who print one story and move on to the next to understand. That's why you need to see this chart... As Washington announces historic budget and infrastructure spending proposals, the government clearly thinks it's the solution to just about every problem we have. But such extensive government overreach comes at a cost, as beloved Manward contributor Joel Salatin explains here... "All investors within the next couple of years will be considering, at the bare minimum, climate risks in their portfolios. It's a trend that's here to stay."
- Harlin Singh, head of sustainable investments at Citi Private Bank Want more content like this? | | | |
Amanda Heckman | Editorial DirectorAmanda Heckman is the editorial director of Manward Press. With unrivaled meticulousness, she has spent the past dozen or so years sharpening Andy's already razorlike wit... and has worked with numerous bestselling authors and award-winning financial gurus along the way. | | |
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