That's why Facebook is a key ingredient in many socially responsible funds; 80 funds that examine companies' environmental, social and governance practices count Facebook as a top 10 holding.
But that might be about to change as some of the major ratings providers serving as a filter for many ESG funds reconsider Facebook's positive rating.
While painful, the Cambridge Analytica scandal holds a critical lesson for socially responsible investors—it's not always enough to look at how a company conducts its business, it's also important to consider what that business is.
Facebook is included in many responsible funds largely because of its commitment to using renewable energy (reaching at least 50% clean energy company-wide in 2018)--which is nothing short of incredible. But, investors should think about the question: Is this company ultimately contributing to a better future?
Facebook connects more than two billion people across the world, but its approach to data collection might not be considered a net positive for society, depending on who you're talking to. That's where investors need to apply their own judgment, dig into their portfolios, and determine whether the companies they're invested in align with their own morals and beliefs.
Aligning your money with companies that line up with your beliefs and vision for the future also makes financial sense. Over the past 25 years, companies' valuations have come to be comprised almost completely of intangibles.
That means a company's value no longer lies in raw assets--equipment, buildings, inventory. Instead, a company's brand reputation and public goodwill dictate stock price in today's interconnected world.
This isn't the first time we've seen a company's reputation risk impact shareholders. BP's Deepwater Horizon or Volkswagon's emissions issues are both examples of public goodwill disrupting a company's value.
Taking into account not only each company's ESG rating, but also their net contribution to the future of our planet, might have avoided some of the negative outcomes that investors in both companies experienced.
Companies are not infallible and businesses face consequences that affect their financial performance and reputation—this holds true for all investors. The rise of SRI has been a boon for investors who want to make sure their dollars back companies with positive values, but Facebook's current scandal exposes the shades of grey involved in socially responsible investing.
It's often not enough to filter out the bad, or apply a score based on certain business factors. To align their money with their vision for the future, investors should take a deeper look at the companies in their investment portfolios.
It's time for socially responsible investors to consider how companies are shaping the future and potentially take a more active role in deciding what they want those investments to accomplish—for themselves, but also for the world at large.
Commentary by Dave Fanger, CEO and founder of socially responsible investment firm Swell Investing.
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