The US Federal Trade Commission filed against Facebook, interpreting its business strategy as portraying the dangerous threats of a monopoly. Demands are being made to break up the tech giant, due to it currently controlling significant proportions of social media and its resulting influence. This summer, some of its largest advertising clients boycotted Facebook over failure to act on hosting hate speech, conspiracy theories and other fake news.
MSCI, a leading global ESG rating house, has further downgraded Facebook’s ESG score – now rated a laggard (B). Another ESG data provider, Sustainalytics, also considers the company high-risk. This demonstrates wider acknowledgement of Facebook’s failing governance, obscure data usage, astonishing societal influence yet total lack of acknowledged responsibility. From a sustainable investment perspective, we have held this view much longer, and have long avoided investing in the firm in both EQ Positive Impact and EQ Future Leaders Portfolios.
The US tech giants, including Facebook or Amazon, sit solidly within most traditionally managed portfolios. Our approach to investing considers the risks of these firms for people and planet and questions their sustainability. As a result, these two tech giants (Facebook and Amazon) are not held within our portfolios. How do we explain that?
Within the EQ Future Leaders Portfolios, we only invest in the most responsible of companies within each sector (top 25% as rated by MSCI) – an ambitious check to avoid exposure to technology companies that are managed irresponsibly. Both companies would fail on this screen.
Within the EQ Positive Impact Portfolios, we want to support those firms that derive their core revenues from enabling positive impact on social or environmental challenges. Technology can provide important efficiency gains on environmental resources (such as energy, water and waste), and can serve as an important enabler to enhance social mobility (such as more accessible finance and education). Again, both companies are not seen as contributing to solutions so would not be obvious candidates for the portfolios.