How your investments can promote positive change

Managing
October 8, 2019

You may recall, with shock, the horrific shootings at the Christchurch mosque earlier this year? Of course you do – the 17-minute attack was streamed live on Facebook and viewed 4,000 times before it was removed [1]. While our hearts went out to those affected, the Facebook coverage sparked some interesting debate within the finance industry. In response, and to support those affected, many in the finance industry spoke up about removing Facebook from their portfolios.

This was not a new topic of conversation. Many in the industry had previously spoken of the uncertainty of including Facebook in their portfolios because of Facebook’s Environmental, Social and in particular, their Governance (ESG) scores.

Within sustainability  there are broadly three key factors to consider:

  • Environmental  - considers the rates of renewable resource harvest, pollution creation, and non-renewable resource depletion that can be continued indefinitely
  • Social  - includes aspects such as basic human rights, labour rights and community development, and
  • Governance  – refers to the ability to support a defined level of economic production indefinitely where an organisation might consider codes of conduct and risk management and undertake to ensure processes and policies are in place to ensure they can achieve what it is they set out to do.

ESG analysis refers to a wide range of non-financial drivers. In-depth analysis of these can identify mis-priced securities and alpha for investors.

With these factors in mind, from an environmental perspective, Facebook seem committed to 100% renewable energy in 2020 and reducing both water use and waste to landfill. In 2017 Facebook had an Environmental score of 51, relative to their industry score of 57. Their score now sits at 62, relative to the industry at 59 [2].

From a social perspective their mission is to give people the power to build community and bring the world closer together. In 2017 Facebook had a Social score of 62, relative to their industry score of 52. Their score now sits at 67, relative to the industry at 53.

But it seems their governance may be somewhat lacking. Previous exposes around data, privacy, fake content and, more recently, the Christchurch shootings raise this as an issue.

Attention to this is exacerbated by the absence of a Corporate Social Responsibility report. Such a report is generally (published annually) and should document their benchmarks, what they’re looking to achieve and what milestones they’ve completed as they work towards their sustainability goals. In 2017 Facebook had an Environmental score of 38, relative to their industry score of 60. Today their Governance score has increased to 43, relative to the industry at 62.

The first user report of the video had come in 12 minutes after the horrific ordeal had ended. Once alerted Facebook claimed to have removed the original video and established an automatic detection service to enable ease of deletion. According to Facebook within 24 hours they had blocked 1.2m copies at the point of upload, and deleted another 300k. Unfortunately, it has already been shared to an alternative file sharing site and copies that had been edited, or recorded from a screen were harder to remove.

The Facebook showing of the video raised once again the dilemma of whether we, as a society, are better placed to assess an incident of this type by widespread availability of the action on display or is more harm than good likely to eventuate?

Should our outrage at Facebook be reflected by our uninstalling the app or alternatively protest in the hope of influencing its decision making?

A similar question arises for those of you who are socially conscious but may be invested in Facebook through your KiwiSaver savings or a managed fund.

Rebekah Swan

We spoke to Rebekah Swan, ESG Investment Specialist, Client Advocate, Head of Product, AMP Capital New Zealand. As a pioneer in the sector, AMP Capital has managed responsible investments for more than 16 years. Today, they are one of Australia and New Zealand’s largest responsible investment managers, looking after more than AUD2.5b of ethical funds globally [3].  Rebekah shared AMP Capital’s view on this.

“Demand for ethical investments is on the rise with more and more people wanting to use their money to create positive change in the world and align their investments with their values.”

As a shareholder AMP Capital, along with other investors, is better placed to influence Facebook’s direction by their ability to voice their concerns and vote on issues, rather than divesting.

In  March of this year the New Zealand Superannuation Fund, and other crown entities including ACC, the Government Superannuation Fund Authority, the National Provident Fund and Kiwi Wealth, had collectively over NZD800m invested in Facebook [4].  AMP Capital along with the crown institutions are one of the 89 financial institutes, with an aggregate total worth of NZD13t, from New Zealand, Australia, Europe and the US who are calling for social media companies to take on more responsibility for the content published on their platforms [5].

So the moral of the story here is, despite your outrage, to get involved or support those who are, so you can influence an outcome that you feel so passionately about.

[1] BBC.com, Facebook: New Zealand attack video viewed 4,000 times, 19 March 2019

[2] Finance.yahoo.com, Facebook Inc., 16 September 2019

[3] AMPCapital.com, Ethical Investment, 31 December 2018

[4] NZHerald.co.nz, Massive Kiwi funds with $90b consider dumping Facebook, Google, Twitter shares if firms broke law by hosting shooting video, 20 March 2019

[5] NZSuperFund.nz, Social Media Collaborative Engagement, 8 October 2019

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