Investors who think they’re bucking the popular ESG trend by investing in anti-ESG mutual funds will be sorely disappointed to learn that their investments are surprisingly “woke.” Consider, for example, the top 10 holdings in the Strive US Energy ETF, which has attracted more than $500 million since launching this August. The ETF invests primarily in oil and gas companies.
“Every single one of these companies has a sustainability page prominently displayed on the home page of its corporate website, as well as a sustainability report,” writes Oxford University Visiting Professor Robert Eccles on the Forbes website. All of the top companies acknowledge that climate change is real, report on Scope 1 and 2 emissions, recognize the importance of net-zero emissions goals, and rely on the disclosure framework developed by Financial Stability Board’s Task Force on Climate-related Financial Disclosures.
“Thus, even though some politicians may be denying climate change and others, like Strive, are saying ‘Drill, baby, drill!’ these companies know they need to adapt to the energy transition,” Eccles writes. “Whether they are innovating and transforming in the right way and fast enough is open to debate.”
In addition, each company discusses Diversity, Equity and Inclusion on its website and eight of the top 10 companies provide data on women and minorities in executive positions.
So, how exactly does Strive Asset Management intend to live up to its promise of investing in companies that have “…untapped potential if liberated from ESG-imposed constraints”? According to a November 15 press release, it plans to carry its anti-ESG message into the boardrooms of companies like Chevron, for example, by issuing shareholder proposals during the 2023 proxy season next Spring.
Does Strive actually intend to tell Chevron’s board that the company should forget all about transitioning to clean energy and stop all this nonsense about workforce diversity? The idea is ludicrous to anyone who understands the public perception of oil companies and the reputational risk Chevron would face. On its website, Chevron pledges to spend $10 billion over the next five years on “lower-carbon capital investments and… energy transition goals.”
Reversing course would not only be costly and a public relations nightmare for Chevron but also would represent a breach of the mutual fund manager’s fiduciary duty to consider all risks and drivers of value, including ESG factors, when making investment decisions.
One thing is clear: Strive Asset Management is gathering assets from investors who think they are thumbing their noses at political correctness. But it’s virtually impossible to invest in a publicly traded company (or private equity fund for that matter) that isn’t making at least some effort to pursue ESG goals. More than 90% of all S&P 500 companies and 70% of Russell 1000 companies publish reports on their ESG efforts, according to McKinsey & Co.
They aren’t turning back.