LGBT Activism viewed as a “Violation”
The first “ESG” funds decades ago, branded as socially responsible investing (SRI), were probably those with religious restrictions. ESG is a “broad church” where there are always exceptions to any generalization.
MAG7 (Apple, Alphabet, Amazon, Meta, Microsoft, Nvidia, Tesla) seldom appear on exclusion lists, with an occasional exception of Tesla for two reasons: corporate governance issues that have led investors to bring a Delaware lawsuit against Elon Musk’s remuneration, and not recognizing trade unions.
Many ESG funds do have an above average weighting in technology stocks, but one new ETF, Inspire 500 ETF (ticker:PTL) based on “biblical values” excludes all seven of the MAG7.
The reason is that holdings need to have an Inspire Impact score (ranging from minus 100 to plus 100) of zero or above. The concept of a “biblically aligned” company searches for companies deemed to be “a blessing to their customers, communities, workforce, and the world.”
Most of the criteria employed seem typical of other ESG approaches. “Violations” include human rights violations, alcohol, tobacco, gambling, pornography and cannabis, which do feature on other exclusion lists.
However two of the “violation” list – abortion and LGBT (Lesbian, Gay, Bisexual and Trans) activism are associated with certain groups of Christians, especially in the US, and including “fundamentalist” Christians, while other branches of Christianity do not categorise these areas as violations.
It is not clear if the “abortion” violation involves companies directly providing abortion procedures or pills, or those paying for their staff to have abortions, but the latter reason might explain some MAG7 exclusions. Apple is one of many companies that will provide financial help for employees in US states forbidding abortion, to travel to other states for an abortion.
We would also guess that LGBT activism may explain the exclusion of some or all MAG7. To provide just two examples, Apple has lobbied against LGBTQ laws in states such as Iowa, Florida and Texas, and Meta partners with LGBTQ advocacy organisations, which also lobby policymakers. Large technology companies generally emphasise their “diversity and inclusion” human resources policies, are seen as leaders in workforce diversity, and have often won associated awards.
Indeed, some other ESG scoring criteria have a positive, rather than a negative, weighting for “diversity and inclusion” of staff and boards, which clearly illustrates how subjective ESG is.
Whatever political or personal views investors may hold on controversial issues such as abortion and LGBTQ rights, the ETF industry is versatile enough to create products catering for- those opinions.