Socially Conscious Investing

The greatest moral responsibility of a corporation is the maximization of shareholder value. Corporations have other responsibilities, such as consumer safety, and treating its workforce fairly. If a company is doing those things right, then they will also be maximizing shareholder value.

That's why I raise my eyebrows when I see how Starbucks wears its social activism on its sleeve. I'm not talking about the cup, either. Starbucks' social activism was manifest during the desultory effort by Howard Schultz, called Race Together, to get America talking about race.

But we're way beyond that, now. Starbucks is a leading proponent of homosexual marriage. Starbucks is "deeply dedicated to embracing diversity" and "proud...to support...marriage equality for same-sex couples."

Allow me to translate the smarmy inclusive language. Starbucks rejects traditional marriage.

Therefore, I will not patronize Starbucks, and not just because their coffee tastes like burnt piss. The question is, has Starbucks breached its fiduciary responsibility by openly supporting the degeneration and demoralization of traditional values? Schultz is all out of fucks, saying that Starbucks "did provide a 38% shareholder return over the last year."

Would a shareholder lawsuit contending Schultz left even better returns on the table convince him to be a little more discreet about his contempt for traditional values?

Perhaps, but there is a segment of stock market investors that esteems feeling virtuous over return on investment. Kiplinger publishes a list of mutual funds that appeal to "socially conscious" investors. The first fund listed is iShares MSCI USA ESG Select Index (KLD), an ETF that tracks an index of companies it says follow "high environmental, social and governance standards."

Who's in this ETF? By share weight, their top five holdings are 3M, NextEra Energy, Microsoft, Apple, and Ecolab. 3M is also known as Minnesota Mining and Manufacturing. Isn't mining also known as resource extraction? How socially responsible is stripping the tops off mountains? Doesn't society bear the cost of the "externalities" of resource extraction, like pollutants and increasing scarcity?

Apple? I can't even. Apple is basically a smart-phone manufacturer. They employ tens of thousands of assemblers in the far east and pay them slave wages. Plus, they are building a corporate HQ that dwarfs the Pentagon and will permanently scar the earth. But they have somehow maintained their counter-culture corporate identity.

NextEra? I actually like this company. Apple I would short. NextEra could be a good long term investment (I am not giving financial advice). So how does NextEra make its money? Their second-quarter income statement reports earnings of $1.59 per share. Of that, $0.97 per share is contributed by their subsidiary, Florida Power & Light.

Florida Power & Light generates much of its own power using natural gas. Smart. Natural gas, on a price per kilowatt basis, is competitive with nuclear generation (which they also provide). NextEra is investing $500 million dollars a year in natural gas power plants. NextEra also owns and maintains natural gas pipelines. Pipelines are icky and dirty and they always rupture and kill endangered flagellates. They better make sure those pipelines don't come near San Diego bearing dirty, non-renewable natgas. Our city fathers have declared San Diego will be running on 100 percent renewables within twenty years.

Perhaps the socially conscious investor tucks themselves into bed at night knowing NextEra also generates renewable energy. They provide this because certain municipalities mandate renewable energy and allow utilities to subsidize their lower income ratepayers, shielding them from skyrocketing rates. So, what is the bottom line contribution of its wind projects? Ten cents per share. Ten cents per share won't even pay the dividend, not even close.

NextEra admits in its outlook statement that they depend on "public policy support for wind and solar development and construction." Public policy support means subsidies for low income utility consumers and government mandates on renewable energy purchase levels. When government wants to be partners with corporations, its tempting to call it fascism. Perhaps that is a bit strong. Whatever its called, it is certainly tyranny.