Across the country – and around the globe – a growing number of demonstrators are voicing their opposition to the recent conflict in the Middle East. But if you’ve been following the news, you may have noticed that some campus-based demonstrators have taken their protests a step further – demanding that their institutions divest from companies in their investment portfolios whose activities can be connected to Israel’s conflicts with Palestinians.
“Universities, social organizations and other institutions are feeling the pressure from stakeholders to make a significant change, and our portfolio managers have been hearing about it from both institutions and individuals,” says Mike Thiessen, Chief Sustainability Officer and Co-chief Investment Officer at Genus. “In the midst of war and unrest around the world, many clients do not want to be supporting companies that provide weapons – whether directly or indirectly.”
But it’s not just institutional and organizational investing practices that are under the microscope. Many individual investors are also recognizing that their investment portfolio may be playing an inadvertent role in funding war – a role that may not align with their values. Even more are likely unaware that they’re doing so.
The good news is, if you fall into either of these groups, you can do something about it.
Divesting from weapons and controversies
At Genus, we’ve long been a proponent of divestment as a values-alignment strategy to ensure you’re not investing in companies that operate against the values you live by in your life.
For many years we’ve offered an oil and gas screen through our Fossil Free™ funds for sustainability-minded investors. And recently, we’ve added additional screens for investors looking to divest of companies that engage in Indigenous conflicts, gender discrimination or activities that harm the planet’s biodiversity.
Now, investors who want to avoid holding companies that support global conflict can do so as well. “We’ve responded to our clients’ desire to divest from military and related companies with a variety of screens designed to reduce related harm in our portfolios,” Thiessen says.
All of our Fossil Free and impact portfolios include a weapons screen, so “if a company makes over 10% of its revenue from conventional or controversial weapons or weapons systems, we exclude that company from the portfolio,” Thiessen says. “This includes companies such as Lockheed Martin, but also many aerospace manufacturers such as Boeing. This way, our clients are not funding the companies selling jets, missiles, drones and other modern tools of war.”
Beyond weapons, our controversies screen also excludes companies involved in severe controversies within specific local or global communities, or surrounding certain products. For example, we’ve screened out Tesla from our portfolios due to recent controversies around workplace culture and business practices.
But how do we determine what constitutes a controversy? Rest assured that it’s not a subjective decision, but one based on third-party data. “We rely on data from MSCI ESG Research, which collects information from non-governmental organizations, watchdogs, news agencies, social media and other sources around the world,” Thiessen says. Our portfolios are regularly evaluated and rebalanced based on new data and emerging evidence.
Get started aligning your portfolio with your values
It’s altogether too easy to feel powerless in the face of global conflicts. But the reality is, we can all make an impact by divesting. Here’s how to get started:
- Get clear on what you value: You’ll need to decide if holding weapons makers and controversial companies is something you feel comfortable with. If not, know that this is in your control – and you can make a change.
- Understand what’s in your portfolio: Read the fine print on your portfolio holdings. If you own a fund, index or ETF, check inside these products to learn about their holdings. Find out exactly what companies you’re supporting – and if they profit from weapons and/or controversial activities. You can ask your wealth advisor to research the companies for you or look them up yourself.
- Make the switch: A lot of clients worry that this part will be difficult. But moving to a more responsible portfolio is easier than you think. Talk to a wealth advisor who can provide you with a thorough analysis and a list of options – or dig into the research yourself.
Whether you’re investing for yourself or on behalf of an institution, a bit of time and commitment can help you build a values-aligned portfolio that you – and your stakeholders – can feel proud of. “The most important thing to understand is that you have a choice,” Thiessen says. “You can decide whether to invest in weapons (and war) – or not.”
Interested in learning more about divesting from weapons and other controversies? Contact a Genus advisor today, and we can help you get started.
References:
Protesters demand UW divest from companies involved in Israel-hamas war | CBC News (2024) CBCnews. Available at: https://www.cbc.ca/news/canada/kitchener-waterloo/university-of-waterloo-boycott-protest-israel-palestine-1.7195166 (Accessed: 13 May 2024).
(No date) Explainer: Protesters demand McGill divest from companies linked to Israel | Montreal Gazette. Available at: https://montrealgazette.com/news/local-news/protesters-demand-mcgill-divest-in-companies-linked-to-israel-what-does-that-mean (Accessed: 13 May 2024).
(No date) MSCI ESG Controversies factsheet. Available at: https://www.msci.com/documents/1296102/1636401/ESG_Controversies_Factsheet.pdf/4dfb3240-b5ed-0770-62c8-159c2ff785a0 (Accessed: 13 May 2024).
