Facebook Faces ESG Index Music

July 18, 2019

Tech titans Microsoft and Alphabet (Google) are in the top five holdings of both, and Netflix is in the top-20, but there’s not a trace of Facebook.

 

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Another example of Facebook falling behind its peers in the ESG space can be seen when looking at the holdings of one of the largest and oldest ESG ETFs, the iShares MSCI U.S.A. ESG Select ETF (SUSA). Microsoft, Apple and Alphabet (Google) are in the top five holdings of the $1.1 billion fund, which launched in 2005.

 

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Even though technology companies make up 29% of SUSA, Facebook has a 1% weighting in the fund, landing it far down on holdings list.

Fortunately for Facebook, exclusion from ESG indexes isn’t a one-way trip. The company could redeem itself and tackle ESG-related issues to qualify for reentry. ESG investing is picking up, and companies such as a social media giant probably don’t want to be excluded from the party.

While other U.S.-focused ESG ETFs have higher weightings than 1%—such as the Shares MSCI KLD 400 Social ETF (DSI), with a 2% weighting—how Facebook reacts to the record FTC fine and corporate guidelines being imposed will certainly impact its future standing in ESG investment indexes. Surely the older and more established ESG funds will be seriously reexamining Facebook’s place in ESG-land.

But at this point, the ESG trend is not Mark Zuckerberg’s friend.

Drew Voros can be reached at [email protected]

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