June 6, 2023 • 41 mins
Robert Netzly is an Evangelical Christian trying to realize his values and stay true to his own beliefs while working in investing – and he personifies a bigger war going on in the investment world and American politics over a little acronym called ESG. In the last year, there’s been a Republican backlash to the trillions of dollars committed to investing practices that take environmental, social, and governance concerns (such as climate change and gender inequalities) into account. Saijel Kishan is an ESG reporter for Bloomberg News, and she wrote a fascinating piece last fall called “What Would Jesus Buy: Investor Charts Course for $2 Billion Fund.” In today’s special episode of Crash Course, she shares more of that story, which is a tale of two conflicts, in a way. Should there be biases in the investing world, be it faith-based or social activism? And should ESG exist at all?
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Speaker 1 (00:00):
Have you ever looked at the stock market and thought,
Dear Lord, my portfolio needs some help, or thank God,
it's not that bad today. Well, for one investor in Idaho,
that prayer happens every day, though with a little less exasperation.
Speaker 2 (00:16):
Heavenly Father, as we head into our week full of work,
we pray that you would go with us, that you'd
be with us, Lord, go before us. Thank you.
Speaker 1 (00:24):
That's Robert Netsley, the president and CEO of Inspire Investing.
His company does something he.
Speaker 2 (00:30):
Calls biblically responsible investing.
Speaker 1 (00:32):
Biblically responsible investing for the uninitiated.
Speaker 2 (00:36):
What doesn't mean to invest for the Lord of God
means certainly to do what you can to earn a
good return and use the returns for redemptive purposes, but
also means, like Proverbs chapter sixteen says, better is a
little with righteousness than great gains with injustice. If there
has to be a trade off between making a ton
of money or being moral, they choose practices morality, ethics,
(01:03):
and there's very few people that I think would disagree
with that.
Speaker 1 (01:06):
So Robert invests depending on what he thinks the Bible
might support or not support. He used to label his
offerings as faith based.
Speaker 2 (01:15):
ESG in twenty nineteen, like when we watched WWJD. It's
the first fund that had ESG in the name. What
would you Do WWD? But now it's just like, all
of a sudden, I'm talking to people who don't even
know what a sock or an equity or mutual fund is,
and they're.
Speaker 3 (01:30):
Like, oh, ESG he said that, Yeah, exactly what.
Speaker 4 (01:33):
Does it mean?
Speaker 2 (01:33):
I don't know, but it's evil, wicked, bad.
Speaker 1 (01:38):
Welcome to Crash Course, a podcast about business, political, and
social disruption and what we can learn from it. I'm
Tim O'Brien. Robert Netsley personifies a bigger war going on
in the investment world and American politics over a little
acronym called ESG. In the last year, there's been a
Republican backlash to the trillions of dollars committed to investing
(02:01):
practices that take environmental, social, and governance concerns into account.
And then there's Robert. He's an evangelical Christian trying to
realize his values and stay true to his own beliefs
in the investing world. That's sometimes intersex with Wall Street's
ESG strategy, but it also lays bare some contradictions. My
(02:24):
colleague Sagel Kishan reports on ESG investing for Bloomberg News,
and she flew to Idaho to meet with Robert. She
wrote a fascinating piece last fall called what would Jesus Buy?
Investor charts course for two billion dollar fund and she's
going to share more of that story with us for
today's crash course Conservatives versus ESG. It's a tale of
(02:49):
two conflicts in a way, should there be biases in
the investing world, be it faith based or social activism?
And should ESG exist at all? Welcome to the show, Stagel.
Speaker 3 (03:02):
Thanks for having me.
Speaker 1 (03:04):
So before we dive back into Robert's story, I want
listeners to get to know you a little bit more.
You've been at Bloomberg about twenty years now. And how
long have you been on the ESG beat.
Speaker 3 (03:15):
It's just over three years, just before the pandemic we
started the.
Speaker 1 (03:18):
Beat, and y ESG, why do you love this little
corner of the market.
Speaker 3 (03:22):
It's complex, it's undefined, it's everywhere but nowhere. Just trying
to figure out the complexities is what draw me to
the beat.
Speaker 1 (03:30):
And you're good at solving complexities.
Speaker 3 (03:32):
I wish.
Speaker 1 (03:33):
I bet you are. I think you are. That's why
you're here. Now. How did you find out about Robert Netsley?
What attracted you to him as a story?
Speaker 3 (03:40):
Well, I first heard about him after the shooting in Yuvaldi,
Texas last year, and I was looking at whether es
funds held gunstocks and I thought, obviously no. But then
I found his funds and we found that he held
shares in the firearms company called sturm Rugger, one of
the big ones, and a shooting sports company called Vista Outdoor.
(04:02):
So I called him. He said that gun violence is deplorable,
but guns themselves aren't unethical or immoral by themselves. I
remember thinking it was a little weird, but to me
it was new to hear about a conservative version of ESSU.
I knew I had to learn more. So I helped
on a plane and Future Boise last year.
Speaker 1 (04:22):
Okay, well, so why don't you take over the story
from there, and then we'll meet back here later in
the episode to talk more about ESG and what you've
learned sounds great.
Speaker 3 (04:41):
Robert Nesley is a small part of a bigger clash
that's going on in America, Red versus Blue and the
worlds of finance investing haven't been immune. EESG, which stands
for Environmental, Social and Governance Investing, has become a pinata
and dragged into the cultural wars. On the one hand,
(05:02):
proponents of ESG say it's important to take into account
things like climate change and workers' rights when making financing
and investing decisions, especially amid societal changes, regulation and pressing
problems like global warming. When opponents on the political right
say es SHE has become a way for progressives to
(05:24):
impose their views and their goals on financial markets, essentially
a threat to the American way of doing business. Robert
Nesley is somewhere in the middle of those two. He's
a bit of an anomaly. He straddles both sides. In
one sense, he is a faith based investor who excludes
things like tobacco and alcohol from his portfolio. On the other,
(05:47):
he invests in gun makers and pushes back on things
like LGBTQ issues. We'll get into more of that later,
but first I want you to hear where Robert came from.
He grew up in California in the Monterey Bay area.
His parents married right out of high school and had
(06:08):
Roberts and his younger brother. Not long after that, his
mom stopped using drugs, but his dad didn't, so they
got the worse.
Speaker 2 (06:16):
When I was about three, reading by my mom, my
younger brother's artistic and on food stamps for a little
bit and all that kind of thing, going through life
and just really seeing the faithfuls.
Speaker 3 (06:26):
I got through all of that as evangelical Christians. They
went to church. The community there gave Robert's ability and
he had a sense that God was providing for his family.
But he really found God one day when he was
seven years old and on time out.
Speaker 2 (06:42):
I remember this really feeling like sorry for mysel whatever whatever.
Nobody loves me, yah yah YadA, and you know, writing
in my kiddy, and it's remembering what the pastor said
that you know, Jesus loves you actually and he will
forgive you of your sin. And as a seven year
(07:02):
old does remember praying and asking Jesus to come into
my heart, you know, and I give him my life
to him there and then that's when the personally I
made a decision to really follow Christ in a very
childlike way.
Speaker 3 (07:13):
Robert went to community college then later got his college
degree online. In between that he met his wife at
a tiny church in his hometown. They lived a life
of what he called intentional ministry, doing work in the
community in the name of God. He worked with high
schoolers with disabilities and at a pro life pregnancy center.
(07:35):
When he and his wife started having kids and needs
more money, he got a job at a Volkswagen dealership
until it closed during the two thousand and eight financial crisis.
Speaker 2 (07:43):
On my way home from getting let go, when they
told everybody, you know what was going on, like ahead
was kind of spending were respecting our second baby, and
it's like, I don't know what I'm going to do.
Speaker 4 (07:52):
So we just kind of pulled.
Speaker 2 (07:53):
Over and praying and really felt a peace of God
to say, like, you know what, you've never really liked
that job anyway, this is your opportunity to do whatever
you want to do and I'll take care of it.
Speaker 3 (08:05):
So he thought about what jobs could have family friendly hours,
and he decided to look for a job at a bank.
He applied to everything he could, and then he got
a gig with Wells Fargo in their investment department. Even
though math was his worst subject in school, he picked
it up really quickly, got license and moved into a
role advising clients on their investments. He says he was
(08:27):
happy as a clam and til decided to lead a
Bible study on finances at his church. He wanted to
talk about what the Bible teaches people about money. So
he starts for searching and.
Speaker 2 (08:37):
Then some article came up about biple. The response investing
like investing interesting click and introduced this concept of hard
thought about what the companies you own, like you're an owner,
what they're actually doing to make money? Right? And so
if you own Netflix or whatever videos like, would you
have a video store that sold pornography videos in the back?
Speaker 4 (08:57):
Like?
Speaker 2 (08:57):
No, I wouldn't, And yet that's exactly what we do
as shareholders.
Speaker 3 (09:01):
Robert says there are lots of scriptures in the Bible
that say it's bad to make money off of things
that are immoral.
Speaker 2 (09:07):
That is attestable to the ward.
Speaker 3 (09:09):
So he turned to his own investments, and he quickly
found what he considers to be a major red flag.
He had been investing in companies that manufacture aborta fashions
or drugs that helped ender pregnancy. His heart sank. Remember,
he was the president of a profe pregnancy center and
his reading of the Bible concluded that abortion is bad,
(09:31):
so that investment was a complete no no for him.
Speaker 2 (09:34):
I remember sitting at my desk sort of slack jo
like this son that this was something that I had missed,
that the church is obviously missing. And then I couldn't
do my job, like somebody came to mister now and
asked me to play the trade, like I couldn't do
it with a queen conscience. And then I go craps
because what else was I going to do? And so
(09:56):
it's incredibly frightening.
Speaker 3 (09:57):
So he quit the bank, and he said he felt
God was calling him to do something else. He dabbled
with what he called biblically responsible investing, and then in
twenty fifteen he started his own firm called Inspire Investing. Essentially,
Inspire invests in companies it seems worthy, engages with those
that hopes to convert, and excludes or divest from ones
(10:19):
that it finds immoral.
Speaker 2 (10:21):
In the apostle, Paul in one of his letters to
the churches and talks about how he's like he's compelled
to preach the Gospel and there there's nothing else that
he can do. He's just he's compelled to preach the gospel,
and I really felt like that, like I'm compelled, Like
there's nothing else I can do other than then this,
you know, goes share this story with people, and I
(10:44):
don't know how it's going to end up, you know,
maybe terribly financially, but this is what I have to do.
So close my eye, step out the mote, and you know,
trusted God, and he's been He's faithful.
Speaker 3 (10:55):
The market was exceptionally bad last year because of inflation,
the war in the Ukraine, and fears of a global recession.
So maybe it doesn't mean a lot that his biggest
fund slump about twenty four percent last year. If we
look back to a good year twenty nineteen, his fund
was up twenty eight percent, but it was still slightly
below the overall stock market. But remember what Robert said
(11:18):
at the beginning of this episode. For him, it's not
all about making money.
Speaker 2 (11:23):
I'm not an investor who's a Christian. Like I'm a Christian.
You have to work in investment in industry.
Speaker 3 (11:28):
Many of the biggest and most profitable companies are excluded
from his portfolio, which is almost a guarantee that his
investments will underperform.
Speaker 2 (11:37):
We exclude companies that you know, support legislation that is
empathetical to a biblical viewpoint, like pushes a certagy or
going twenty to an activist organization that's explicitly pushing an
undisable viewpoint on those areas.
Speaker 3 (11:54):
So Robert's reading of the Bible says abortion is bad.
We'll think of all the companies that now it's that
they would pay for employees to travel for an abortion
after the Supreme Court overturn Roe v. Wade last summer,
they're out of its portfolio. Also excluded all of the
companies that support or finance floats during the Pride Parade.
(12:16):
His reading of the Bible isn't supportive of LGBTQ rights either.
I'll just note here that while Netley says that he
loves his LGBTQ neighbors, he doesn't want what he describes
as their lifestyles promoted in society and by companies. Nor
does he want companies to discriminate against people like Kim
(12:36):
in the workplace who hold more traditional views on marriage.
So abortion access and LGBTQ rights are only two issues,
but they put a lot of companies on the exclude list.
Other companies are shunned for reasons such as distributing pornography,
selling tobacco and alcohol products, funding stem cell research, and
(12:57):
promoting in vitro fertilization. All in all, Robert says Inspire
excludes about half of this in P five hundred companies
like Amazon, Walmart's Apple, and Google's parent company Alphabets. In
an effort to limit the number of companies on the
(13:17):
exclude list, Robert will often press executives, encouraging them to
avoid what he says is politicization.
Speaker 2 (13:25):
Here's one example, Costco, who likes Costco wholesale fans of
free samples in the room.
Speaker 3 (13:31):
He's on the stage at a conservative conference in twenty eighteen.
Speaker 2 (13:34):
Last summer, we were alerted to the fact that they
had begun sponsoring certain gay pride parades throughout the country,
a handful of different cities. Obviously, this is concerning to us.
So I picked up the phone and I just called
Investor Relations.
Speaker 3 (13:48):
He said. The CFO called him back and they had
several conversations.
Speaker 2 (13:52):
About six weeks after that initial phone call, got another
call from this gentleman telling us that Costco had made
the executive decision not to support divisive issues his word,
divisive issues such as gay pride parades.
Speaker 3 (14:05):
Costco wouldn't respond to requests for comment, but these sorts
of campaigns show that his work is about more than
just investing in this faith. He's having an influence. It
doesn't always go his way, though, He says he's tried
to persuade Smuckers against supporting LGBTQ rights and other quality issues.
He's also tried to press stick Sporting Goods against paying
(14:27):
for employee travel for abortions, but so far he's been unsuccessful. Yet,
Robert says he avoids the shame game.
Speaker 2 (14:36):
One of the big criticisms of physically responsible investing generally
is that it can be easily perceived or assumed that
it's a guilt trip game, right, like, hey, did you
know that you're invested in this saying chamee? And unfortunately,
I think historically there have been those that have taken
that approach. Good intentions maybe, but you know, run approach.
(14:56):
And you know, we've heard a lot of people, especially
from the early days, like before we got an invol
like the decades, you know, nineties and eighties and whatnot,
that that really was the perception that it was like
a guild and shame sort of legalistic approach, which is
distasteful and not really difficult. We're supposed to be compelled
by love and grace.
Speaker 3 (15:15):
Not guilt and shame, So take that as you will.
But one thing that really struck me was that he
decided to label his funders e SG. When I thought
about it, it made sense in some ways. I mean,
Inspire certainly screens companies by a variety of categories that
fall under e S and G topics, which is environmental,
(15:37):
social and governance issues. Inspire will screen for human rights violations,
forced labor and other worker issues like minimum wage policies.
It'll look at whether companies are cognizant of their environmental
impacts such as water consumption and air pollution. And Inspire
will screen for discriminatory or prejeatory lending where companies are
(16:00):
aggressively marketing products in low income communities. All of those
are considered ESG factors. But the day I visited him
last August, that was all about to change. Right before
our interview, he was in a meeting with his board
and they decided to remove the ESCH label from their funds.
Speaker 2 (16:19):
I don't know if there was some meeting that they
had in conservative radio land or something right, but like, hey,
this year, let's talk about ESG every single time we
go on the here and so the you know, just
we noticed the rhetoric is like increasing. Hmm. Watching this,
I don't know how that's going to go. We're committed
to like trying to be alive, trying to be redempted
influence on ESG. And meanwhile we're getting like Lambassett from
the left for like saying were ESG.
Speaker 3 (16:41):
Roberts says he got blowback from liberal corners for claiming
the ESCH label while investing in stocks that might contradict
a more traditional understanding of what ESG means. Meanwhile, his
more conservative clients were also getting confused by the label.
Conservative talking heads like Glenn Beck and Tucker Carson had
been attacking ESG on air, describing it as what they
(17:04):
call a leftist agenda. So have high profile politicians such
as Florida Governor Ron de Santis and former Vice President
Mike Pence. Beck has said ESG poses a danger to
soul of America. DeSantis has gone as far as directing
his state to pull billions of dollars from black Rock,
(17:24):
the Wall Street money manager that's been the most vocal
about pressing companies on issues like climate change, and more
than a dozen states have pushed anti ESG laws. So
if all these guys are calling ESG woke capitalism, what
was inspired doing? Robert says he wishes ESG could be
seen as more neutral, but it is what it is.
Speaker 2 (17:47):
It's a narrative that we are powerless to counteract. If
we had a bigger microphone than maybe we would try.
But the amount. Yeah, when every Serti pundit is calling
an evil like, we just cannot counteract that narrative.
Speaker 3 (18:05):
Not that Robert NeSSI wants to counteract conservative talking points.
He is on the conservative end of the spectrum after all,
and he shared the stage at conservative conferences with big
names from Republican Party. He says he won't endorse candidates,
but his work naturally leads him to back or speak
has against companies based on whether they're handling of social
(18:27):
issues conforms to his reading of the Bible.
Speaker 2 (18:30):
We believe that a healthy business respects all viewpoints, right,
and they certainly they claim to be tolerant and inclusive,
then they should actually be so in practice. So do
you want them neutral or do you want them to
watch about neutral? Right? So mean neutral by allowing all points.
Speaker 3 (18:48):
Making shoes, just situating cheese.
Speaker 2 (18:55):
If it's Nike, yes I would like it, and it's
a hobby lobby or just like what I like him
to keep not being neutral, you know. But even those
companies they respect new point diversity and all sorts of
people working there, so they're not It's neutrality in you know,
not imposing your beliefs, you know, upon the people working
(19:18):
there in a way that is you know, heavy handed
or whatever else, like it's respecting all the points.
Speaker 1 (19:24):
Wow. Wow, I'm sorry to interrupt Stagel, but this is
just so interesting to me. Robert sounds like such a
likable man, and he has goals of realizing his values
as an investor and through his portfolio. But I also
think there's some hypocrisy and contradictions going on here that
are worth exploring. He's asking companies like Nike, for example,
(19:47):
to be neutral and to not put values ahead of
their product line for example, or to not put values
ahead of their sponsorships. And yet then he's turning around
and saying Chick fil A or a hobby lobby is
doing the right thing thing by restricting certain people from
its premises or from its product line, And that just
feels to me like a deep contradiction, especially from someone
(20:10):
who says they're a Christian if you accept that sort
of a basic tenet of Christianity is love and forgiveness.
Who is he really forgiving? Who does he really love
when he's working through where he's going to invest? And
then the criticisms he has of other people for making
exactly the same choices he does.
Speaker 3 (20:30):
Well, that's where it gets all murky. A lot of
conservatives feel that corporate America has been co opted by
liberals who are pushing goals like climate change, for instance.
These conservatives want businesses to focus on business and to
be more neutral and not following liberal goals.
Speaker 1 (20:50):
Yeah, but neutralities in the eye of the beholder too
r right, too right, and at least classically with investment.
If you're saying you're being neutral, you're trying to look
just at the numbers. And now you have these inflicts
between people who say, we have the numbers, but we
also have values. But then you have Robert Netsley who's saying,
my values are good for me, but your values aren't
good for you.
Speaker 3 (21:09):
Maybe this is a good place to pause on the story.
Speaker 1 (21:11):
I agree, let's take a break, and then where are
we going when we get back.
Speaker 3 (21:16):
I want to step back and talk to some of
the experts I've been speaking to about what's going on
in the issue space, and then we'll go back to
Roberts and here's some of his sorts.
Speaker 1 (21:26):
Great, we'll be right back with all of that. Okay,
we're back with Bloomberg's ESG reporter Segel Kishan.
Speaker 3 (21:37):
Thanks for having me.
Speaker 2 (21:38):
So we've just heard the.
Speaker 1 (21:39):
Story of Robert Netsley, a faith based investor in Idaho.
But he's not the first person obviously who's invested this way. So, Sagel,
why don't you take over the story again and give
our listeners some of that history.
Speaker 3 (21:51):
Thank you. Based investing is the oldest foe, of saying
old capitalism.
Speaker 2 (21:56):
Sure, I mean going back to slave trade in the UK.
Speaker 3 (21:59):
This is Robert Netsley again.
Speaker 2 (22:01):
Yeah, you had the Quakers and others who just refused
to invest in the slave trade and were outspoken about
slave trade. So well, the people of faith, specifically Christian
faith in that context and scripturally, like even thousands of
years before that, you got proverbs and rules surrounding commerce
(22:21):
that prohibit immorality, like including the slave trade. You know,
going back to Sillaviting and Moses, this is an immoral business.
You don't steal people and sell them.
Speaker 3 (22:34):
I called Nikita Singal to learn more about this. She's
the co head of Sustainable Investment and ESG Atlizard Asset
Management in New York.
Speaker 5 (22:44):
Esg's birthplace was kind of from the Sri movement.
Speaker 3 (22:49):
Sri that's socially responsible investing. She pointed to religious groups
like the Methodists as well as Sharer law in the
Muslim faith.
Speaker 5 (22:57):
And many other religions have some form of influence over
how the followers of that faith should invest in line
with the principles of that religion.
Speaker 3 (23:06):
When hot butts in is Shoes later arose around the
Vietnam War and Apartheis in South Africa, a lot of
consumers started using their purchasing power to boycott companies turning
a profit there.
Speaker 5 (23:18):
All of that time period was about investing in companies
that were we believed they were engaging in activities that
were not positive for society, and the tool that was
used was to just simply exclude investing in those companies
because it was signaling a specific value or a virtue.
I think ESG is very different from all of that.
Speaker 3 (23:37):
In the Keyse's eyes as a person who does this
kind of investing every day, ESG is.
Speaker 5 (23:44):
Not virtue signaling. It's not a product, it's a process.
It's actually part and parcel and a very essential part
of good investing. And what it is about is thinking
on behalf of our clients as their fiduciaries, what are
these emerging risks and opportunities related to the environment and
society that are increasingly becoming market issues.
Speaker 3 (24:06):
When I told Nikisa about Robert's fund, she was unequivocal.
Speaker 5 (24:10):
I would not consider that ESG.
Speaker 3 (24:13):
She highlighted for me the difference between ESG and what
she calls impacts investing. That's where an investor might try
to use the investments to affect change or influence a
company's policies.
Speaker 5 (24:25):
There is a healthy and growing subset of our clients
who are interested in that, and we need to make
sure that we can do it while keeping in mind
their risk return objectives. But it's not the place of
a global asset manager like us to be able to
have an opinion on that.
Speaker 3 (24:40):
To learn more about what makes ESG ESG. I called
an expert who I've spoken to you while on the beat, v.
Speaker 4 (24:46):
Told Hennish, and I'm Westein and faculty director of the
ESG Initiative at the Wharton School, and I'm also the
Deloitte and twohe professor of management.
Speaker 3 (24:54):
Viz has a similaritate to na Kisa when it comes
to what factors go into the ESG investment plan.
Speaker 4 (25:01):
ESG is about doing hard financial analysis and it's not
at all driven by ideology. It's driven by economics.
Speaker 3 (25:11):
He'll study data to try to understand how companies are
analyzing environmental, social, and governance factors. Then he'll look into
how those factors might affect a company's bottom line. Here's
an example. Palm oil is a common ingredient found in
cosmetic products like lipsticks, but it's also leading to a
(25:33):
lot of deforestation around the world.
Speaker 4 (25:35):
That's just one of many examples. Or an agricultural company
by changing its mix of supplies, by changing where and
how it's sourcing, can have an impact on deforestation and
an impact on clear cutting and other environmentally damaging practices.
Companies are going to be increasingly pressured to undertake those actions.
Some companies are head in that transition, some companies are behind.
(25:59):
That should be reflected in their valuation. Otherwise, government policy
or consumer changes in preferences will lead them to be
forced to make these changes later on when they're more
expensive to make.
Speaker 3 (26:11):
It's not a short term gain. He's really trying to
map out how a company's decisions today will affect its
profits in the future.
Speaker 4 (26:19):
There may be periods of time like twenty twenty two,
where you outperform the market, but you will underperform over
the medium to long term.
Speaker 3 (26:27):
A number of industry groups report that trillions of dollars
are already weighing EESG issues to some degree. That's a
massive pool of capital, and fitz says it's only going
to get bigger. But the southern political polarization of ESGU
worries him. Sure, ESU models need work, but he doesn't
(26:47):
think that's a reason to give up on the strategy
or ignore how these factors affect the markets.
Speaker 4 (26:53):
What I'd point to is the unfair standard they're holding
the ESG movement to. They say, we have haven't built
the data set yet that can predict future stock market returns.
That we haven't built the financial model that can predict
which stock will outperform the others over the next ten years.
Show me anyone in the financial service space who has
(27:14):
a data set that can predict which stocks are going
to outperform the others over the next ten years. Anyone
who had such a data set would be a billionaire.
There's a struggle to always, in each market cycle, in
each month, try to figure out which stocks are going
to outperform and which arn't.
Speaker 3 (27:33):
There's so much confusion about what ESG is. It means
different things to different people. The data is incomplete, it's
difficult to compare, and overall the field is still a
work in progress, and even experts acknowledge that ESG analysis
is still in its infancy. Nikita says people just have
to appreciate where the industry is.
Speaker 5 (27:53):
That's the wild wild West that we're still in.
Speaker 3 (27:56):
Nikita also says she doesn't see bias at work in
esgunis regardless of how the models are built.
Speaker 5 (28:03):
There is no such thing as a good ESG company
or a bad ESG company, because you're throwing in three
very different variables and you're somehow assuming that that is
going to make some sense. Our job as an investor
is not to say whether that's good or bad for society.
It's about saying how does that impact the financial markets.
Speaker 3 (28:22):
Roberts agrees with the Kisa and fits that is she
shouldn't be prescriptive, but he thinks that's actually what's happening.
Speaker 2 (28:30):
The Pollyanna and me probably wishes that there could be
a two part of the UESG system.
Speaker 3 (28:35):
And how would that work. We'll take the E for example.
Speaker 2 (28:39):
There are those who just think mining is bad and
oil production is literally evil, and it's killing Mother Earth,
and we should stop all drilling, period, no matter what
the costs. The Bible says that we're here God has
put us in his earth to like exercise his dominion
over this world. We have a right to extract things
(29:04):
from their earth. Right we have a right to use
the resources to benefit mankind.
Speaker 3 (29:09):
Robert's biblical view of mining lines up with a more
conservative way of thinking. So the conservative ESG system miight
grade mining companies highly and invest in more of them,
whereas a liberal EESG system might grade them poorly and
not invest one issue, two parties, and two very different approaches.
Speaker 1 (29:30):
Okay, hang on a second, I'm going to butt in here.
Again to clarify, Nikita and vit are saying that ESG
is not political and it's not partisan. They say they're
just looking at data that shows how a company will
perform in the future depending on how they handle environmental, social,
and governance factors. But some conservatives think that issues like
(29:51):
climate change, for instance, are inherently political, even if the
vast majority of scientists agree that climate change is real.
Speaker 3 (30:00):
Yeah, that's a pretty good summary, tim And actually there
may be even more approaches to issue than what I've
laid out. I spoke to another faith based investor, Mark Reggier,
who works in Wisconsin, and he has a different reading
of the Bible than Robert does.
Speaker 2 (30:15):
I make it a rule not to tell anybody what
Jesus would do, because I don't know. That's what makes
the difference between somebody who's the son of God and
somebody who's definitely not.
Speaker 3 (30:26):
Like I said, there's no clear definition of is issue.
There's lots of different takes on it. It depends on
who you speak with.
Speaker 1 (30:33):
What a minefield. I want to talk more about this,
but we have to take an ad break first. We'll
be right back. Okay, We're back with Sagel Kishan, the
ESG wizard of Bloomberg News. I've found this whole story
so fascinating, Sagel, and a lot's gone on since you
(30:57):
interviewed Robert the last time. Tell me about some of
the most significant things that have happened within the ESG
movement during that period.
Speaker 3 (31:04):
Gosh, so much has happened. We've had Ronda Santis pylon
An attack EESG. We've had attorney generals across different states
launch investigations into ESG. We've had billions of dollars pulled
out of black Rock, Wall Street's biggest champion of ESG,
and plenty of ANTIESG bills being pushed through states.
Speaker 1 (31:26):
You know, it's very interesting to me when these things
happen in the US, where a momentum comes behind a movement,
whatever the movement might be. We saw this happening with
another acronym CRT or critical race theory that invaded the
discussion of education and what's appropriate for the classroom and
what isn't It's rare that you get that same phenomenon
(31:47):
on Wall Street and that it becomes so clearly politicized
so quickly, And what do you think gave it this
kind of energy, like, why now and why has it
gotten such traction?
Speaker 3 (31:57):
Why now? I mean, the ESG movement, if you can
call it a movement, has overtaken in some ways asset
managers and banks. Everybody's been pushing to look at things
like climate change, c suite diversity, inequalities.
Speaker 1 (32:12):
The composition of boards exactly exactly.
Speaker 3 (32:15):
And so that's why we've had this big pushback because
Wall Street has gone big on this in the last
three years.
Speaker 1 (32:21):
And is that pure lunacy. Has Wallstreet gone off its
rocker that it's now actually trying to embrace things like
climate change or corporate diversity or boardroom diversity. I mean,
clearly its critics think it has, and they're painting it
as dangerous, but just trying to step back for our
listeners a little bit. As someone who watches Wall Street
(32:44):
as a sophisticated observer, as a very numerous sophisticated observer,
do you think this is a threat to the foundations
of American finance and the roots of Wall Street.
Speaker 3 (32:56):
It's funny that you say that, because progressives who are
trying to push and act on things like climate change
and inequalities in society, they don't feel that capsule markets
corporations are doing enough. In fact, they think it's something
called greenwashing, where a company saying they're doing good things,
(33:16):
but really they're not. So it's been pushed and pulled
from both sides at the moment.
Speaker 1 (33:21):
And that critique from the left is you actually are
not putting your money where your mouth is, exactly, and
now you have Wall Street stepping up or at least
attempting to to put its money where its mouth is.
The left says it's not enough money and the right
saying watch your mouth. And caught in the middle are
essentially money managers trying to figure out both profitable ways
(33:42):
to invest in socially responsible ways to invest in. Hence
a firestorm.
Speaker 3 (33:48):
Absolutely, by the end of the day, Wall Street is
about making money. They're doing this to generate fees, to
generate revenue. But the antiesh backlash is actually now sent
a chill down Wall street spine. We've seen a lot
of banks, a lot of investors who two years ago
would wax lyrical about climate change and seasuit diversity. Now
(34:11):
they've gone on the down low.
Speaker 1 (34:12):
And is that because they see reputational risk baked into
that that at the end of the day. They're saying
to themselves, it might be socially responsible, we even might
make money off of this, but this sort of firestorm
of criticism we're getting doesn't make it worth it, because
we might lose business in the long run.
Speaker 3 (34:30):
Absolutely, I mean Larry Think, the chief of Black Rock,
he's really been attacked in many ways by the Republicans.
Speaker 1 (34:38):
And deeply personally attacked.
Speaker 3 (34:39):
Absolutely, they've really called him on billboards.
Speaker 1 (34:42):
Some of its facts of anti Semitism.
Speaker 3 (34:44):
And so he's had to then tone down his rhetoric
on climate change. And last year he went down to
Texas to even meet all executives who explain to them
the energy transition and they need to shift a cleaner fuels,
but there are tax on him and the company have
been pretty relentless, and that's why a lot of other
companies have kind of duck for cover, and they're really
(35:05):
toning down what they're saying about climate change in particular.
And on top of that, we've had Attorney general's launch
investigations looking at the legal ees in many of the
efforts that Wall Street are doing when it comes to
the energy transition. So yeah, everybody's really looking at their
marketing documents, the pitch books, making sure that they have
all their ducks lined up.
Speaker 1 (35:27):
I guess so, as we both know, no one really
has all their ducks lined up, no matter what they're doing,
whether they're investor, a corporate manager, a parent, or a teacher.
I think one of the things I wonder about in
all this is if there is a consensus, a scientific consensus,
that climate change might be a problem. I think there's
definitely a social consensus that people should not be discriminated
(35:50):
against for leadership positions in politics or in corporate America
simply because they're a woman, or because they're a person
of color or have a different ethnic background. If we're forestalling,
putting money behind these kinds of efforts based on bad information,
and it runs against both scientific information and broadly held
(36:11):
social values, we're getting into a pretty problematic place, aren't we,
in terms of being able to take the necessary action
we need to solve problems.
Speaker 2 (36:20):
No.
Speaker 3 (36:20):
Absolutely, But to people on the right, a lot of
diversity initiatives smacks of affirmative action, of quotas, and historically
they've hated all of that.
Speaker 1 (36:31):
Yeah, I wonder how many of those people on the
right come from lots of different countries historically and have
lots of different backgrounds, and now they kind of want
just one thing. But that's probably for a different podcast.
I want to come back to money in ESG here.
I also think it's useful to frame exactly how vast
the ESG realm is because most money invested in Wall
(36:52):
Street has still invested the old fashioned way. People try
to find either growth opportunities or undervalued company and create
a calculus that will result in a profitable payoff somewhere
down the road. How big actually is the ESG universe
right now in terms of what percentage of assets on
(37:12):
Wall Street flow towards it.
Speaker 3 (37:14):
Well, it's certainly not a majority of the assets. It's
probably less than ten, if not five percent of the assets.
But ESG investors they have said, like trillions is involved
in ESG. But what's happening now because of concerns of
greenwashing when people exaggerate their environmental claims, we're seeing a
sort of shrinkage going on both in Europe and the US.
(37:36):
So the numbers are in flux at the moment.
Speaker 1 (37:39):
So from where you sit, do you think this means
that the SG movement is going to run out of steam,
Does it die? Does it get repackaged with different initials
and sort of sneak past its critics? How does this
play out?
Speaker 3 (37:52):
There are even people within ESG who want to get
rid of the acronym altogether because of all the bad
press in the past year. They're thinking of more mundane
labels like sustainable investing or de risking or material risk factors,
which they don't really excite people, but that's really what
the issue is.
Speaker 1 (38:10):
Maybe they could call it save the planet so your
grandchildren can still live on it. But that's too long
for an investment.
Speaker 5 (38:16):
Isn't it.
Speaker 3 (38:17):
But despite the malaise, we're not really seeing companies or banks,
even though they're being less vocal about it, they're still
pushing on behind the scenes on many of these initiatives,
something called green hushing, where you don't talk about your
green activities but you do it anyway, but you do
it anyway. Yeah, this backlash isn't going to go away.
(38:39):
There's gonna be ebbs and flows. But we've got the
elections next year. We've got some of the candidates riding
on anti woke tickets, Rando centers and another one, Vivek
Ramaswami U. Huh yeah, so yeah, it's going to continue
to be bashed.
Speaker 1 (38:54):
Okay, So Joel, I don't let anybody escape this show
without sharing with our listeners what they've learned, that little
aha that they've discovered by examining the subject we're talking about. So,
what have you learned about ESG and the anti ESG
movement that you didn't know before you began talking to
(39:15):
Robert Netsley and others.
Speaker 3 (39:18):
I guess maybe this is naive of me, But in Europe,
in other parts of the world, there isn't this backlash.
It's only in America where this backlash is. So I've
been surprised by the pushback by the rights on an
investment strategy that people on left are saying is not
really doing much. What I've learned things aren't so black
(39:41):
and white.
Speaker 1 (39:42):
They never are. Thank you for joining us today.
Speaker 3 (39:46):
Thank you.
Speaker 1 (39:47):
You can find Sagel Kishan's reporting on Bloomberg dot com
and if you want to become a subscriber the Bloomberg
terminal here At crash Course, we believe the collisions can
be messy, impressive, challenging, surprise, and always instructive. In today's
Crash Course, I learned that there are many ways to
skin the cat when you're talking about what is and
(40:09):
isn't a value based investment strategy. What did you learn?
We'd love to hear from you. You can tweet at
the Bloomberg Opinion handle at Opinion or me at Tim
O'Brien using the hashtag Bloomberg Crash Course. You can also
subscribe to our show wherever you're listening right now and
leave us a review that helps more people find the show.
(40:30):
This episode was produced by the indispensable Anna Masarakis, Moses
On Dam and Me. Our supervising producer is Magnus Hendrickson,
and we had editing help from Sagebauman, Katie Boyce, Jeff Grocott,
Mike Nizza and Christine Vanden Bilart. Blake Maples does our
sound engineering, and our original theme song was composed by
(40:51):
Luis Gara. I'm Tim O'Brien. We'll be back next week
with another Crash Course.
Have you ever looked at the stock market and thought,
Dear Lord, my portfolio needs some help, or thank God,
it's not that bad today. Well, for one investor in Idaho,
that prayer happens every day, though with a little less exasperation.
Speaker 2 (00:16):
Heavenly Father, as we head into our week full of work,
we pray that you would go with us, that you'd
be with us, Lord, go before us. Thank you.
Speaker 1 (00:24):
That's Robert Netsley, the president and CEO of Inspire Investing.
His company does something he.
Speaker 2 (00:30):
Calls biblically responsible investing.
Speaker 1 (00:32):
Biblically responsible investing for the uninitiated.
Speaker 2 (00:36):
What doesn't mean to invest for the Lord of God
means certainly to do what you can to earn a
good return and use the returns for redemptive purposes, but
also means, like Proverbs chapter sixteen says, better is a
little with righteousness than great gains with injustice. If there
has to be a trade off between making a ton
of money or being moral, they choose practices morality, ethics,
(01:03):
and there's very few people that I think would disagree
with that.
Speaker 1 (01:06):
So Robert invests depending on what he thinks the Bible
might support or not support. He used to label his
offerings as faith based.
Speaker 2 (01:15):
ESG in twenty nineteen, like when we watched WWJD. It's
the first fund that had ESG in the name. What
would you Do WWD? But now it's just like, all
of a sudden, I'm talking to people who don't even
know what a sock or an equity or mutual fund is,
and they're.
Speaker 3 (01:30):
Like, oh, ESG he said that, Yeah, exactly what.
Speaker 4 (01:33):
Does it mean?
Speaker 2 (01:33):
I don't know, but it's evil, wicked, bad.
Speaker 1 (01:38):
Welcome to Crash Course, a podcast about business, political, and
social disruption and what we can learn from it. I'm
Tim O'Brien. Robert Netsley personifies a bigger war going on
in the investment world and American politics over a little
acronym called ESG. In the last year, there's been a
Republican backlash to the trillions of dollars committed to investing
(02:01):
practices that take environmental, social, and governance concerns into account.
And then there's Robert. He's an evangelical Christian trying to
realize his values and stay true to his own beliefs
in the investing world. That's sometimes intersex with Wall Street's
ESG strategy, but it also lays bare some contradictions. My
(02:24):
colleague Sagel Kishan reports on ESG investing for Bloomberg News,
and she flew to Idaho to meet with Robert. She
wrote a fascinating piece last fall called what would Jesus Buy?
Investor charts course for two billion dollar fund and she's
going to share more of that story with us for
today's crash course Conservatives versus ESG. It's a tale of
(02:49):
two conflicts in a way, should there be biases in
the investing world, be it faith based or social activism?
And should ESG exist at all? Welcome to the show, Stagel.
Speaker 3 (03:02):
Thanks for having me.
Speaker 1 (03:04):
So before we dive back into Robert's story, I want
listeners to get to know you a little bit more.
You've been at Bloomberg about twenty years now. And how
long have you been on the ESG beat.
Speaker 3 (03:15):
It's just over three years, just before the pandemic we
started the.
Speaker 1 (03:18):
Beat, and y ESG, why do you love this little
corner of the market.
Speaker 3 (03:22):
It's complex, it's undefined, it's everywhere but nowhere. Just trying
to figure out the complexities is what draw me to
the beat.
Speaker 1 (03:30):
And you're good at solving complexities.
Speaker 3 (03:32):
I wish.
Speaker 1 (03:33):
I bet you are. I think you are. That's why
you're here. Now. How did you find out about Robert Netsley?
What attracted you to him as a story?
Speaker 3 (03:40):
Well, I first heard about him after the shooting in Yuvaldi,
Texas last year, and I was looking at whether es
funds held gunstocks and I thought, obviously no. But then
I found his funds and we found that he held
shares in the firearms company called sturm Rugger, one of
the big ones, and a shooting sports company called Vista Outdoor.
(04:02):
So I called him. He said that gun violence is deplorable,
but guns themselves aren't unethical or immoral by themselves. I
remember thinking it was a little weird, but to me
it was new to hear about a conservative version of ESSU.
I knew I had to learn more. So I helped
on a plane and Future Boise last year.
Speaker 1 (04:22):
Okay, well, so why don't you take over the story
from there, and then we'll meet back here later in
the episode to talk more about ESG and what you've
learned sounds great.
Speaker 3 (04:41):
Robert Nesley is a small part of a bigger clash
that's going on in America, Red versus Blue and the
worlds of finance investing haven't been immune. EESG, which stands
for Environmental, Social and Governance Investing, has become a pinata
and dragged into the cultural wars. On the one hand,
(05:02):
proponents of ESG say it's important to take into account
things like climate change and workers' rights when making financing
and investing decisions, especially amid societal changes, regulation and pressing
problems like global warming. When opponents on the political right
say es SHE has become a way for progressives to
(05:24):
impose their views and their goals on financial markets, essentially
a threat to the American way of doing business. Robert
Nesley is somewhere in the middle of those two. He's
a bit of an anomaly. He straddles both sides. In
one sense, he is a faith based investor who excludes
things like tobacco and alcohol from his portfolio. On the other,
(05:47):
he invests in gun makers and pushes back on things
like LGBTQ issues. We'll get into more of that later,
but first I want you to hear where Robert came from.
He grew up in California in the Monterey Bay area.
His parents married right out of high school and had
(06:08):
Roberts and his younger brother. Not long after that, his
mom stopped using drugs, but his dad didn't, so they
got the worse.
Speaker 2 (06:16):
When I was about three, reading by my mom, my
younger brother's artistic and on food stamps for a little
bit and all that kind of thing, going through life
and just really seeing the faithfuls.
Speaker 3 (06:26):
I got through all of that as evangelical Christians. They
went to church. The community there gave Robert's ability and
he had a sense that God was providing for his family.
But he really found God one day when he was
seven years old and on time out.
Speaker 2 (06:42):
I remember this really feeling like sorry for mysel whatever whatever.
Nobody loves me, yah yah YadA, and you know, writing
in my kiddy, and it's remembering what the pastor said
that you know, Jesus loves you actually and he will
forgive you of your sin. And as a seven year
(07:02):
old does remember praying and asking Jesus to come into
my heart, you know, and I give him my life
to him there and then that's when the personally I
made a decision to really follow Christ in a very
childlike way.
Speaker 3 (07:13):
Robert went to community college then later got his college
degree online. In between that he met his wife at
a tiny church in his hometown. They lived a life
of what he called intentional ministry, doing work in the
community in the name of God. He worked with high
schoolers with disabilities and at a pro life pregnancy center.
(07:35):
When he and his wife started having kids and needs
more money, he got a job at a Volkswagen dealership
until it closed during the two thousand and eight financial crisis.
Speaker 2 (07:43):
On my way home from getting let go, when they
told everybody, you know what was going on, like ahead
was kind of spending were respecting our second baby, and
it's like, I don't know what I'm going to do.
Speaker 4 (07:52):
So we just kind of pulled.
Speaker 2 (07:53):
Over and praying and really felt a peace of God
to say, like, you know what, you've never really liked
that job anyway, this is your opportunity to do whatever
you want to do and I'll take care of it.
Speaker 3 (08:05):
So he thought about what jobs could have family friendly hours,
and he decided to look for a job at a bank.
He applied to everything he could, and then he got
a gig with Wells Fargo in their investment department. Even
though math was his worst subject in school, he picked
it up really quickly, got license and moved into a
role advising clients on their investments. He says he was
(08:27):
happy as a clam and til decided to lead a
Bible study on finances at his church. He wanted to
talk about what the Bible teaches people about money. So
he starts for searching and.
Speaker 2 (08:37):
Then some article came up about biple. The response investing
like investing interesting click and introduced this concept of hard
thought about what the companies you own, like you're an owner,
what they're actually doing to make money? Right? And so
if you own Netflix or whatever videos like, would you
have a video store that sold pornography videos in the back?
Speaker 4 (08:57):
Like?
Speaker 2 (08:57):
No, I wouldn't, And yet that's exactly what we do
as shareholders.
Speaker 3 (09:01):
Robert says there are lots of scriptures in the Bible
that say it's bad to make money off of things
that are immoral.
Speaker 2 (09:07):
That is attestable to the ward.
Speaker 3 (09:09):
So he turned to his own investments, and he quickly
found what he considers to be a major red flag.
He had been investing in companies that manufacture aborta fashions
or drugs that helped ender pregnancy. His heart sank. Remember,
he was the president of a profe pregnancy center and
his reading of the Bible concluded that abortion is bad,
(09:31):
so that investment was a complete no no for him.
Speaker 2 (09:34):
I remember sitting at my desk sort of slack jo
like this son that this was something that I had missed,
that the church is obviously missing. And then I couldn't
do my job, like somebody came to mister now and
asked me to play the trade, like I couldn't do
it with a queen conscience. And then I go craps
because what else was I going to do? And so
(09:56):
it's incredibly frightening.
Speaker 3 (09:57):
So he quit the bank, and he said he felt
God was calling him to do something else. He dabbled
with what he called biblically responsible investing, and then in
twenty fifteen he started his own firm called Inspire Investing. Essentially,
Inspire invests in companies it seems worthy, engages with those
that hopes to convert, and excludes or divest from ones
(10:19):
that it finds immoral.
Speaker 2 (10:21):
In the apostle, Paul in one of his letters to
the churches and talks about how he's like he's compelled
to preach the Gospel and there there's nothing else that
he can do. He's just he's compelled to preach the gospel,
and I really felt like that, like I'm compelled, Like
there's nothing else I can do other than then this,
you know, goes share this story with people, and I
(10:44):
don't know how it's going to end up, you know,
maybe terribly financially, but this is what I have to do.
So close my eye, step out the mote, and you know,
trusted God, and he's been He's faithful.
Speaker 3 (10:55):
The market was exceptionally bad last year because of inflation,
the war in the Ukraine, and fears of a global recession.
So maybe it doesn't mean a lot that his biggest
fund slump about twenty four percent last year. If we
look back to a good year twenty nineteen, his fund
was up twenty eight percent, but it was still slightly
below the overall stock market. But remember what Robert said
(11:18):
at the beginning of this episode. For him, it's not
all about making money.
Speaker 2 (11:23):
I'm not an investor who's a Christian. Like I'm a Christian.
You have to work in investment in industry.
Speaker 3 (11:28):
Many of the biggest and most profitable companies are excluded
from his portfolio, which is almost a guarantee that his
investments will underperform.
Speaker 2 (11:37):
We exclude companies that you know, support legislation that is
empathetical to a biblical viewpoint, like pushes a certagy or
going twenty to an activist organization that's explicitly pushing an
undisable viewpoint on those areas.
Speaker 3 (11:54):
So Robert's reading of the Bible says abortion is bad.
We'll think of all the companies that now it's that
they would pay for employees to travel for an abortion
after the Supreme Court overturn Roe v. Wade last summer,
they're out of its portfolio. Also excluded all of the
companies that support or finance floats during the Pride Parade.
(12:16):
His reading of the Bible isn't supportive of LGBTQ rights either.
I'll just note here that while Netley says that he
loves his LGBTQ neighbors, he doesn't want what he describes
as their lifestyles promoted in society and by companies. Nor
does he want companies to discriminate against people like Kim
(12:36):
in the workplace who hold more traditional views on marriage.
So abortion access and LGBTQ rights are only two issues,
but they put a lot of companies on the exclude list.
Other companies are shunned for reasons such as distributing pornography,
selling tobacco and alcohol products, funding stem cell research, and
(12:57):
promoting in vitro fertilization. All in all, Robert says Inspire
excludes about half of this in P five hundred companies
like Amazon, Walmart's Apple, and Google's parent company Alphabets. In
an effort to limit the number of companies on the
(13:17):
exclude list, Robert will often press executives, encouraging them to
avoid what he says is politicization.
Speaker 2 (13:25):
Here's one example, Costco, who likes Costco wholesale fans of
free samples in the room.
Speaker 3 (13:31):
He's on the stage at a conservative conference in twenty eighteen.
Speaker 2 (13:34):
Last summer, we were alerted to the fact that they
had begun sponsoring certain gay pride parades throughout the country,
a handful of different cities. Obviously, this is concerning to us.
So I picked up the phone and I just called
Investor Relations.
Speaker 3 (13:48):
He said. The CFO called him back and they had
several conversations.
Speaker 2 (13:52):
About six weeks after that initial phone call, got another
call from this gentleman telling us that Costco had made
the executive decision not to support divisive issues his word,
divisive issues such as gay pride parades.
Speaker 3 (14:05):
Costco wouldn't respond to requests for comment, but these sorts
of campaigns show that his work is about more than
just investing in this faith. He's having an influence. It
doesn't always go his way, though, He says he's tried
to persuade Smuckers against supporting LGBTQ rights and other quality issues.
He's also tried to press stick Sporting Goods against paying
(14:27):
for employee travel for abortions, but so far he's been unsuccessful. Yet,
Robert says he avoids the shame game.
Speaker 2 (14:36):
One of the big criticisms of physically responsible investing generally
is that it can be easily perceived or assumed that
it's a guilt trip game, right, like, hey, did you
know that you're invested in this saying chamee? And unfortunately,
I think historically there have been those that have taken
that approach. Good intentions maybe, but you know, run approach.
(14:56):
And you know, we've heard a lot of people, especially
from the early days, like before we got an invol
like the decades, you know, nineties and eighties and whatnot,
that that really was the perception that it was like
a guild and shame sort of legalistic approach, which is
distasteful and not really difficult. We're supposed to be compelled
by love and grace.
Speaker 3 (15:15):
Not guilt and shame, So take that as you will.
But one thing that really struck me was that he
decided to label his funders e SG. When I thought
about it, it made sense in some ways. I mean,
Inspire certainly screens companies by a variety of categories that
fall under e S and G topics, which is environmental,
(15:37):
social and governance issues. Inspire will screen for human rights violations,
forced labor and other worker issues like minimum wage policies.
It'll look at whether companies are cognizant of their environmental
impacts such as water consumption and air pollution. And Inspire
will screen for discriminatory or prejeatory lending where companies are
(16:00):
aggressively marketing products in low income communities. All of those
are considered ESG factors. But the day I visited him
last August, that was all about to change. Right before
our interview, he was in a meeting with his board
and they decided to remove the ESCH label from their funds.
Speaker 2 (16:19):
I don't know if there was some meeting that they
had in conservative radio land or something right, but like, hey,
this year, let's talk about ESG every single time we
go on the here and so the you know, just
we noticed the rhetoric is like increasing. Hmm. Watching this,
I don't know how that's going to go. We're committed
to like trying to be alive, trying to be redempted
influence on ESG. And meanwhile we're getting like Lambassett from
the left for like saying were ESG.
Speaker 3 (16:41):
Roberts says he got blowback from liberal corners for claiming
the ESCH label while investing in stocks that might contradict
a more traditional understanding of what ESG means. Meanwhile, his
more conservative clients were also getting confused by the label.
Conservative talking heads like Glenn Beck and Tucker Carson had
been attacking ESG on air, describing it as what they
(17:04):
call a leftist agenda. So have high profile politicians such
as Florida Governor Ron de Santis and former Vice President
Mike Pence. Beck has said ESG poses a danger to
soul of America. DeSantis has gone as far as directing
his state to pull billions of dollars from black Rock,
(17:24):
the Wall Street money manager that's been the most vocal
about pressing companies on issues like climate change, and more
than a dozen states have pushed anti ESG laws. So
if all these guys are calling ESG woke capitalism, what
was inspired doing? Robert says he wishes ESG could be
seen as more neutral, but it is what it is.
Speaker 2 (17:47):
It's a narrative that we are powerless to counteract. If
we had a bigger microphone than maybe we would try.
But the amount. Yeah, when every Serti pundit is calling
an evil like, we just cannot counteract that narrative.
Speaker 3 (18:05):
Not that Robert NeSSI wants to counteract conservative talking points.
He is on the conservative end of the spectrum after all,
and he shared the stage at conservative conferences with big
names from Republican Party. He says he won't endorse candidates,
but his work naturally leads him to back or speak
has against companies based on whether they're handling of social
(18:27):
issues conforms to his reading of the Bible.
Speaker 2 (18:30):
We believe that a healthy business respects all viewpoints, right,
and they certainly they claim to be tolerant and inclusive,
then they should actually be so in practice. So do
you want them neutral or do you want them to
watch about neutral? Right? So mean neutral by allowing all points.
Speaker 3 (18:48):
Making shoes, just situating cheese.
Speaker 2 (18:55):
If it's Nike, yes I would like it, and it's
a hobby lobby or just like what I like him
to keep not being neutral, you know. But even those
companies they respect new point diversity and all sorts of
people working there, so they're not It's neutrality in you know,
not imposing your beliefs, you know, upon the people working
(19:18):
there in a way that is you know, heavy handed
or whatever else, like it's respecting all the points.
Speaker 1 (19:24):
Wow. Wow, I'm sorry to interrupt Stagel, but this is
just so interesting to me. Robert sounds like such a
likable man, and he has goals of realizing his values
as an investor and through his portfolio. But I also
think there's some hypocrisy and contradictions going on here that
are worth exploring. He's asking companies like Nike, for example,
(19:47):
to be neutral and to not put values ahead of
their product line for example, or to not put values
ahead of their sponsorships. And yet then he's turning around
and saying Chick fil A or a hobby lobby is
doing the right thing thing by restricting certain people from
its premises or from its product line, And that just
feels to me like a deep contradiction, especially from someone
(20:10):
who says they're a Christian if you accept that sort
of a basic tenet of Christianity is love and forgiveness.
Who is he really forgiving? Who does he really love
when he's working through where he's going to invest? And
then the criticisms he has of other people for making
exactly the same choices he does.
Speaker 3 (20:30):
Well, that's where it gets all murky. A lot of
conservatives feel that corporate America has been co opted by
liberals who are pushing goals like climate change, for instance.
These conservatives want businesses to focus on business and to
be more neutral and not following liberal goals.
Speaker 1 (20:50):
Yeah, but neutralities in the eye of the beholder too
r right, too right, and at least classically with investment.
If you're saying you're being neutral, you're trying to look
just at the numbers. And now you have these inflicts
between people who say, we have the numbers, but we
also have values. But then you have Robert Netsley who's saying,
my values are good for me, but your values aren't
good for you.
Speaker 3 (21:09):
Maybe this is a good place to pause on the story.
Speaker 1 (21:11):
I agree, let's take a break, and then where are
we going when we get back.
Speaker 3 (21:16):
I want to step back and talk to some of
the experts I've been speaking to about what's going on
in the issue space, and then we'll go back to
Roberts and here's some of his sorts.
Speaker 1 (21:26):
Great, we'll be right back with all of that. Okay,
we're back with Bloomberg's ESG reporter Segel Kishan.
Speaker 3 (21:37):
Thanks for having me.
Speaker 2 (21:38):
So we've just heard the.
Speaker 1 (21:39):
Story of Robert Netsley, a faith based investor in Idaho.
But he's not the first person obviously who's invested this way. So, Sagel,
why don't you take over the story again and give
our listeners some of that history.
Speaker 3 (21:51):
Thank you. Based investing is the oldest foe, of saying
old capitalism.
Speaker 2 (21:56):
Sure, I mean going back to slave trade in the UK.
Speaker 3 (21:59):
This is Robert Netsley again.
Speaker 2 (22:01):
Yeah, you had the Quakers and others who just refused
to invest in the slave trade and were outspoken about
slave trade. So well, the people of faith, specifically Christian
faith in that context and scripturally, like even thousands of
years before that, you got proverbs and rules surrounding commerce
(22:21):
that prohibit immorality, like including the slave trade. You know,
going back to Sillaviting and Moses, this is an immoral business.
You don't steal people and sell them.
Speaker 3 (22:34):
I called Nikita Singal to learn more about this. She's
the co head of Sustainable Investment and ESG Atlizard Asset
Management in New York.
Speaker 5 (22:44):
Esg's birthplace was kind of from the Sri movement.
Speaker 3 (22:49):
Sri that's socially responsible investing. She pointed to religious groups
like the Methodists as well as Sharer law in the
Muslim faith.
Speaker 5 (22:57):
And many other religions have some form of influence over
how the followers of that faith should invest in line
with the principles of that religion.
Speaker 3 (23:06):
When hot butts in is Shoes later arose around the
Vietnam War and Apartheis in South Africa, a lot of
consumers started using their purchasing power to boycott companies turning
a profit there.
Speaker 5 (23:18):
All of that time period was about investing in companies
that were we believed they were engaging in activities that
were not positive for society, and the tool that was
used was to just simply exclude investing in those companies
because it was signaling a specific value or a virtue.
I think ESG is very different from all of that.
Speaker 3 (23:37):
In the Keyse's eyes as a person who does this
kind of investing every day, ESG is.
Speaker 5 (23:44):
Not virtue signaling. It's not a product, it's a process.
It's actually part and parcel and a very essential part
of good investing. And what it is about is thinking
on behalf of our clients as their fiduciaries, what are
these emerging risks and opportunities related to the environment and
society that are increasingly becoming market issues.
Speaker 3 (24:06):
When I told Nikisa about Robert's fund, she was unequivocal.
Speaker 5 (24:10):
I would not consider that ESG.
Speaker 3 (24:13):
She highlighted for me the difference between ESG and what
she calls impacts investing. That's where an investor might try
to use the investments to affect change or influence a
company's policies.
Speaker 5 (24:25):
There is a healthy and growing subset of our clients
who are interested in that, and we need to make
sure that we can do it while keeping in mind
their risk return objectives. But it's not the place of
a global asset manager like us to be able to
have an opinion on that.
Speaker 3 (24:40):
To learn more about what makes ESG ESG. I called
an expert who I've spoken to you while on the beat, v.
Speaker 4 (24:46):
Told Hennish, and I'm Westein and faculty director of the
ESG Initiative at the Wharton School, and I'm also the
Deloitte and twohe professor of management.
Speaker 3 (24:54):
Viz has a similaritate to na Kisa when it comes
to what factors go into the ESG investment plan.
Speaker 4 (25:01):
ESG is about doing hard financial analysis and it's not
at all driven by ideology. It's driven by economics.
Speaker 3 (25:11):
He'll study data to try to understand how companies are
analyzing environmental, social, and governance factors. Then he'll look into
how those factors might affect a company's bottom line. Here's
an example. Palm oil is a common ingredient found in
cosmetic products like lipsticks, but it's also leading to a
(25:33):
lot of deforestation around the world.
Speaker 4 (25:35):
That's just one of many examples. Or an agricultural company
by changing its mix of supplies, by changing where and
how it's sourcing, can have an impact on deforestation and
an impact on clear cutting and other environmentally damaging practices.
Companies are going to be increasingly pressured to undertake those actions.
Some companies are head in that transition, some companies are behind.
(25:59):
That should be reflected in their valuation. Otherwise, government policy
or consumer changes in preferences will lead them to be
forced to make these changes later on when they're more
expensive to make.
Speaker 3 (26:11):
It's not a short term gain. He's really trying to
map out how a company's decisions today will affect its
profits in the future.
Speaker 4 (26:19):
There may be periods of time like twenty twenty two,
where you outperform the market, but you will underperform over
the medium to long term.
Speaker 3 (26:27):
A number of industry groups report that trillions of dollars
are already weighing EESG issues to some degree. That's a
massive pool of capital, and fitz says it's only going
to get bigger. But the southern political polarization of ESGU
worries him. Sure, ESU models need work, but he doesn't
(26:47):
think that's a reason to give up on the strategy
or ignore how these factors affect the markets.
Speaker 4 (26:53):
What I'd point to is the unfair standard they're holding
the ESG movement to. They say, we have haven't built
the data set yet that can predict future stock market returns.
That we haven't built the financial model that can predict
which stock will outperform the others over the next ten years.
Show me anyone in the financial service space who has
(27:14):
a data set that can predict which stocks are going
to outperform the others over the next ten years. Anyone
who had such a data set would be a billionaire.
There's a struggle to always, in each market cycle, in
each month, try to figure out which stocks are going
to outperform and which arn't.
Speaker 3 (27:33):
There's so much confusion about what ESG is. It means
different things to different people. The data is incomplete, it's
difficult to compare, and overall the field is still a
work in progress, and even experts acknowledge that ESG analysis
is still in its infancy. Nikita says people just have
to appreciate where the industry is.
Speaker 5 (27:53):
That's the wild wild West that we're still in.
Speaker 3 (27:56):
Nikita also says she doesn't see bias at work in
esgunis regardless of how the models are built.
Speaker 5 (28:03):
There is no such thing as a good ESG company
or a bad ESG company, because you're throwing in three
very different variables and you're somehow assuming that that is
going to make some sense. Our job as an investor
is not to say whether that's good or bad for society.
It's about saying how does that impact the financial markets.
Speaker 3 (28:22):
Roberts agrees with the Kisa and fits that is she
shouldn't be prescriptive, but he thinks that's actually what's happening.
Speaker 2 (28:30):
The Pollyanna and me probably wishes that there could be
a two part of the UESG system.
Speaker 3 (28:35):
And how would that work. We'll take the E for example.
Speaker 2 (28:39):
There are those who just think mining is bad and
oil production is literally evil, and it's killing Mother Earth,
and we should stop all drilling, period, no matter what
the costs. The Bible says that we're here God has
put us in his earth to like exercise his dominion
over this world. We have a right to extract things
(29:04):
from their earth. Right we have a right to use
the resources to benefit mankind.
Speaker 3 (29:09):
Robert's biblical view of mining lines up with a more
conservative way of thinking. So the conservative ESG system miight
grade mining companies highly and invest in more of them,
whereas a liberal EESG system might grade them poorly and
not invest one issue, two parties, and two very different approaches.
Speaker 1 (29:30):
Okay, hang on a second, I'm going to butt in here.
Again to clarify, Nikita and vit are saying that ESG
is not political and it's not partisan. They say they're
just looking at data that shows how a company will
perform in the future depending on how they handle environmental, social,
and governance factors. But some conservatives think that issues like
(29:51):
climate change, for instance, are inherently political, even if the
vast majority of scientists agree that climate change is real.
Speaker 3 (30:00):
Yeah, that's a pretty good summary, tim And actually there
may be even more approaches to issue than what I've
laid out. I spoke to another faith based investor, Mark Reggier,
who works in Wisconsin, and he has a different reading
of the Bible than Robert does.
Speaker 2 (30:15):
I make it a rule not to tell anybody what
Jesus would do, because I don't know. That's what makes
the difference between somebody who's the son of God and
somebody who's definitely not.
Speaker 3 (30:26):
Like I said, there's no clear definition of is issue.
There's lots of different takes on it. It depends on
who you speak with.
Speaker 1 (30:33):
What a minefield. I want to talk more about this,
but we have to take an ad break first. We'll
be right back. Okay, We're back with Sagel Kishan, the
ESG wizard of Bloomberg News. I've found this whole story
so fascinating, Sagel, and a lot's gone on since you
(30:57):
interviewed Robert the last time. Tell me about some of
the most significant things that have happened within the ESG
movement during that period.
Speaker 3 (31:04):
Gosh, so much has happened. We've had Ronda Santis pylon
An attack EESG. We've had attorney generals across different states
launch investigations into ESG. We've had billions of dollars pulled
out of black Rock, Wall Street's biggest champion of ESG,
and plenty of ANTIESG bills being pushed through states.
Speaker 1 (31:26):
You know, it's very interesting to me when these things
happen in the US, where a momentum comes behind a movement,
whatever the movement might be. We saw this happening with
another acronym CRT or critical race theory that invaded the
discussion of education and what's appropriate for the classroom and
what isn't It's rare that you get that same phenomenon
(31:47):
on Wall Street and that it becomes so clearly politicized
so quickly, And what do you think gave it this
kind of energy, like, why now and why has it
gotten such traction?
Speaker 3 (31:57):
Why now? I mean, the ESG movement, if you can
call it a movement, has overtaken in some ways asset
managers and banks. Everybody's been pushing to look at things
like climate change, c suite diversity, inequalities.
Speaker 1 (32:12):
The composition of boards exactly exactly.
Speaker 3 (32:15):
And so that's why we've had this big pushback because
Wall Street has gone big on this in the last
three years.
Speaker 1 (32:21):
And is that pure lunacy. Has Wallstreet gone off its
rocker that it's now actually trying to embrace things like
climate change or corporate diversity or boardroom diversity. I mean,
clearly its critics think it has, and they're painting it
as dangerous, but just trying to step back for our
listeners a little bit. As someone who watches Wall Street
(32:44):
as a sophisticated observer, as a very numerous sophisticated observer,
do you think this is a threat to the foundations
of American finance and the roots of Wall Street.
Speaker 3 (32:56):
It's funny that you say that, because progressives who are
trying to push and act on things like climate change
and inequalities in society, they don't feel that capsule markets
corporations are doing enough. In fact, they think it's something
called greenwashing, where a company saying they're doing good things,
(33:16):
but really they're not. So it's been pushed and pulled
from both sides at the moment.
Speaker 1 (33:21):
And that critique from the left is you actually are
not putting your money where your mouth is, exactly, and
now you have Wall Street stepping up or at least
attempting to to put its money where its mouth is.
The left says it's not enough money and the right
saying watch your mouth. And caught in the middle are
essentially money managers trying to figure out both profitable ways
(33:42):
to invest in socially responsible ways to invest in. Hence
a firestorm.
Speaker 3 (33:48):
Absolutely, by the end of the day, Wall Street is
about making money. They're doing this to generate fees, to
generate revenue. But the antiesh backlash is actually now sent
a chill down Wall street spine. We've seen a lot
of banks, a lot of investors who two years ago
would wax lyrical about climate change and seasuit diversity. Now
(34:11):
they've gone on the down low.
Speaker 1 (34:12):
And is that because they see reputational risk baked into
that that at the end of the day. They're saying
to themselves, it might be socially responsible, we even might
make money off of this, but this sort of firestorm
of criticism we're getting doesn't make it worth it, because
we might lose business in the long run.
Speaker 3 (34:30):
Absolutely, I mean Larry Think, the chief of Black Rock,
he's really been attacked in many ways by the Republicans.
Speaker 1 (34:38):
And deeply personally attacked.
Speaker 3 (34:39):
Absolutely, they've really called him on billboards.
Speaker 1 (34:42):
Some of its facts of anti Semitism.
Speaker 3 (34:44):
And so he's had to then tone down his rhetoric
on climate change. And last year he went down to
Texas to even meet all executives who explain to them
the energy transition and they need to shift a cleaner fuels,
but there are tax on him and the company have
been pretty relentless, and that's why a lot of other
companies have kind of duck for cover, and they're really
(35:05):
toning down what they're saying about climate change in particular.
And on top of that, we've had Attorney general's launch
investigations looking at the legal ees in many of the
efforts that Wall Street are doing when it comes to
the energy transition. So yeah, everybody's really looking at their
marketing documents, the pitch books, making sure that they have
all their ducks lined up.
Speaker 1 (35:27):
I guess so, as we both know, no one really
has all their ducks lined up, no matter what they're doing,
whether they're investor, a corporate manager, a parent, or a teacher.
I think one of the things I wonder about in
all this is if there is a consensus, a scientific consensus,
that climate change might be a problem. I think there's
definitely a social consensus that people should not be discriminated
(35:50):
against for leadership positions in politics or in corporate America
simply because they're a woman, or because they're a person
of color or have a different ethnic background. If we're forestalling,
putting money behind these kinds of efforts based on bad information,
and it runs against both scientific information and broadly held
(36:11):
social values, we're getting into a pretty problematic place, aren't we,
in terms of being able to take the necessary action
we need to solve problems.
Speaker 2 (36:20):
No.
Speaker 3 (36:20):
Absolutely, But to people on the right, a lot of
diversity initiatives smacks of affirmative action, of quotas, and historically
they've hated all of that.
Speaker 1 (36:31):
Yeah, I wonder how many of those people on the
right come from lots of different countries historically and have
lots of different backgrounds, and now they kind of want
just one thing. But that's probably for a different podcast.
I want to come back to money in ESG here.
I also think it's useful to frame exactly how vast
the ESG realm is because most money invested in Wall
(36:52):
Street has still invested the old fashioned way. People try
to find either growth opportunities or undervalued company and create
a calculus that will result in a profitable payoff somewhere
down the road. How big actually is the ESG universe
right now in terms of what percentage of assets on
(37:12):
Wall Street flow towards it.
Speaker 3 (37:14):
Well, it's certainly not a majority of the assets. It's
probably less than ten, if not five percent of the assets.
But ESG investors they have said, like trillions is involved
in ESG. But what's happening now because of concerns of
greenwashing when people exaggerate their environmental claims, we're seeing a
sort of shrinkage going on both in Europe and the US.
(37:36):
So the numbers are in flux at the moment.
Speaker 1 (37:39):
So from where you sit, do you think this means
that the SG movement is going to run out of steam,
Does it die? Does it get repackaged with different initials
and sort of sneak past its critics? How does this
play out?
Speaker 3 (37:52):
There are even people within ESG who want to get
rid of the acronym altogether because of all the bad
press in the past year. They're thinking of more mundane
labels like sustainable investing or de risking or material risk factors,
which they don't really excite people, but that's really what
the issue is.
Speaker 1 (38:10):
Maybe they could call it save the planet so your
grandchildren can still live on it. But that's too long
for an investment.
Speaker 5 (38:16):
Isn't it.
Speaker 3 (38:17):
But despite the malaise, we're not really seeing companies or banks,
even though they're being less vocal about it, they're still
pushing on behind the scenes on many of these initiatives,
something called green hushing, where you don't talk about your
green activities but you do it anyway, but you do
it anyway. Yeah, this backlash isn't going to go away.
(38:39):
There's gonna be ebbs and flows. But we've got the
elections next year. We've got some of the candidates riding
on anti woke tickets, Rando centers and another one, Vivek
Ramaswami U. Huh yeah, so yeah, it's going to continue
to be bashed.
Speaker 1 (38:54):
Okay, So Joel, I don't let anybody escape this show
without sharing with our listeners what they've learned, that little
aha that they've discovered by examining the subject we're talking about. So,
what have you learned about ESG and the anti ESG
movement that you didn't know before you began talking to
(39:15):
Robert Netsley and others.
Speaker 3 (39:18):
I guess maybe this is naive of me, But in Europe,
in other parts of the world, there isn't this backlash.
It's only in America where this backlash is. So I've
been surprised by the pushback by the rights on an
investment strategy that people on left are saying is not
really doing much. What I've learned things aren't so black
(39:41):
and white.
Speaker 1 (39:42):
They never are. Thank you for joining us today.
Speaker 3 (39:46):
Thank you.
Speaker 1 (39:47):
You can find Sagel Kishan's reporting on Bloomberg dot com
and if you want to become a subscriber the Bloomberg
terminal here At crash Course, we believe the collisions can
be messy, impressive, challenging, surprise, and always instructive. In today's
Crash Course, I learned that there are many ways to
skin the cat when you're talking about what is and
(40:09):
isn't a value based investment strategy. What did you learn?
We'd love to hear from you. You can tweet at
the Bloomberg Opinion handle at Opinion or me at Tim
O'Brien using the hashtag Bloomberg Crash Course. You can also
subscribe to our show wherever you're listening right now and
leave us a review that helps more people find the show.
(40:30):
This episode was produced by the indispensable Anna Masarakis, Moses
On Dam and Me. Our supervising producer is Magnus Hendrickson,
and we had editing help from Sagebauman, Katie Boyce, Jeff Grocott,
Mike Nizza and Christine Vanden Bilart. Blake Maples does our
sound engineering, and our original theme song was composed by
(40:51):
Luis Gara. I'm Tim O'Brien. We'll be back next week
with another Crash Course.
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