Investing in "Green" ETF

Thinking about sustainability, the frugal way of life and so on, I realised that, through global ETF, we, mustachians, are not really honset with ourselves. By investing in market-efficient ETF, we are also investing, and supporting, non ecological/sustainable businesses.

I’ve stumble across a short list of ETF pretending to be responsible. Of course, they have higher TER, but in the very (not so) very long term (or from an ethical point of view), isn’t it worth it ?

It may be a green-washing tactic similar to those seen in other area of finance and economic (after all, UBS just created an ETF themed after “gender equality”)

Here is the list, feel free to add any ETF and discuss the criterions that makes them states they are “responsible”.

Pictet-Ethos - Swiss Sustainable Equities
Pictet-European Sustainable Equities
JSS Sustainable Equity - Switzerland
Swisscanto (LU) Equity Fund Green Invest Emerging Markets
Vontobel Fund Ethos Equities Swiss Mid&Small
UBS ETF MSCI EMU Socially Responsible
UBS ETF MSCI USA Socially Responsible
UBS ETF MSCI World Socially Responsible
UBS ETF MSCI Emerging Markets Socially Responsible
UBS ETF MSCI Japan Socially Responsible

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Two charts to fuel the discussion:

MSCI World SRI
https://www.msci.com/documents/10199/641712d5-6435-4b2d-9abb-84a53f6c00e4

MSCI World Aerospace and Defense
https://www.msci.com/documents/10199/822f8187-ade9-47c8-bc37-d7068d48b01d

edit: let’s add a third chart …

MSCI World Tobacco
https://www.msci.com/documents/10199/60e06c7e-e189-4193-b7d4-fcee21c3c2fa

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DAMN ! it is financialy rewarding to be a bad guy…

The world is not a fairytale place. Avoiding defense or tobacco companies will not stop wars or anybody from smoking, or could it?

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Man that Aerospace and Defense one looks pretty interesting XD?

Of course we are not in a faitytale, but still, when a company is exposed, the market react accordingly (facebook/cambrige analytica for example).

I just thought that investing in specific ETF can have some weight in future directions of the company. It is just a gut feeling, not backed by any evidence. I don’t know if it’s because I don’t grasp how ETF really works (they’re just a replication of the market but not a part of it), if it’s trying to play the market (though not in my interest) or if it make sense at all.

I just wanted to discuss that, since being frugal is associated (at least for me) with being a responsible person.

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Indeed it does. Outperformed the MSCI World over the last 24 years.

Look at XAR and ITA, both listed at NYSE ARCA.

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Wasn’t the drop more because the missed revenue goals?
I think they even wanted to kick out Zuckerberg because he is wasting too much money trying to combat “fake news” and stuff.

Also what exactly do you mean with green?
Like would you consider VW green? On one hand the had the whole diesel fuckery but they will also going to outproduce Tesla in electric vehicles, which are arguably green.

I think the green thing is pretty hard to check for and way to easy to get around but i do get your point about the responsibility and stuff.

Might get into this and wait for the Iran thing to go bad XD (I honestly hope not but it does not look great).

I agree with you, the green/non-green topic is a matter of debate, and can be easily falsificated by companies (as VW in the example you used).

After giving it a thought, I think that what i wanted to know is this:

Can I have any kind of action or influence on the companies included in the ETF I’m buying or not ?

PS: viac, the lowcost 3a pilar startup, proposes an option about sustainability. Does it make sense or is it à PR stunt ?

well, you can still have a go with the whole spacex blue origin trend if you want to play a bit

If a global trend will indeed favor “green” businesses, you will see it reflected in a standard index tracking ETF. After all, a good part of the affected companies will either fall out of favor, or be forced to go “green”.

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Ha!
This is true only for what “they” want you to hear.
Did you read about the US companies that manage jails? Do you realize how bad the system in the US works?

Those are nowhere near profitable jet but I hope that will change at some point because I am a pretty big space nerd and SpaceX makes some pretty neat stuff (the falcon heavy launch was one of the most awesome moments of this year jet) and they are probably going to launch (and hopefully not kill) the first crewed mission this year.

Jeah that stuff is messed up.

Boh, I guess this stuff is more advertising or following trends than real, social products

Take UBS ETF MSCI EMU Socially Responsible, for example. According to the factsheet, the top 5 constituents are: SAP, Siemens, Total, Allianz and L’Oreal.
Are we really sure these companies invest in an ecological and/or sustainable way - for their whole production/supply chain ? Total sells fuel… :thinking:

I think it’s maybe better investing the usual way and - possibly - use part of the gains for charity or other kind of support…

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Can I have any kind of action or influence on the companies included in the ETF I’m buying or not ?

Hi Gotama
short answer: no.

First of all companies raise money on the stock market when they first enter the market. Afterwards all the stocks changing hands do not impact directly the company. They may have an impact because a lot of this companies pay their management in stocks, so the compensation is linked to the current stock price.

The setting of the price is done by active investors and hedge funds. If you buy a total market ETF with very little turnover, you actually don’t force the ETF to buy stocks f the underlying company; the stocks where bought at the ETF creation and then they just keep them and let them fluctuates with market prices. That’s why the TER is so low; this kind of ETF are not very active on the market directly. There are exception and sometimes they do buy again stocks, but usually passive ETFs are …passive.

As other have said is the customers changing the way the company produce value (more green etc), but is not the investor.

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And to some extent laws, however those can backfire horribly if you have a bunch of retards making them or let coal industry people lead your environmental protection agencies XD.

It is also way to easy to deceive customers into thinking something is “green” or overestimating the relative impact of other things. Hydrogen is a good example of both, it is seen as green because it could be created from renewable resources (witch actually most fuels could) but will probably just be made out of natural gar using a very inefficient process. On the other had the danger of hydrogen cars is way overestimated especially compared to existing gasoline or diesel vehicles.

It’s just a label to make you feel good about yourself, some people are willing to buy into that and banksters gladly take the money off the table

Don’t kid yourself. Unless you have tens, no hundreds millions AUM to move, it won’t even matter. Let’s see, biggest oil company vs biggest socially responsibly fund who wins? XOM vs DSI, 300 to 1, ha ha

Wrong kind of investing. Plant a tree or something…

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Now that is exactly the type of answers I was suspecting. Thanks a lot to make it clear by getting into the basics principles of passive investing, still have a lot of reading to do.

This, and the arguments in the “you-don’t-live-in-a-fairytale” line, in contrast, don’t stand a closer examination. Individual actions don’t stand a chance when taken alone, but begin to make sense when they repeat themselves. It is kind of like when your boss/relatives/media tell you that your personal vote don’t matter in an election or when they tell you that saving little sums of money won’t make you a millionaire… which we know is not exactly how it works :wink:

It is just disappointing that all those big mustachians lumps of money can’t have a “voting/weighting” impact when silently growing to FI.

It’s not the same thing. Single vote for example in UK has power of 1/40000000 - how it supposed to change anything? There’s a bigger chance that you’ll get killed by a shark on your way to the ballot box. People can make a difference only en masse, which indicates that propaganda - changing a lot of people mind on a particular voting issue - is way more effective.

PS. In Switzerland democracy makes more sense because of radical federalism - average power of a vote is 1/1800.

I also don’t think it makes sense to go for those greenwashed ETFs. Just invest in the global market like you would/should anyway, and spend the extra effort in raising awareness about bad behaviors of companies that you’d like to change. Something like that has a way higher chance of working than not investing your (comparatively insignificant) money.

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