And after Vladimir Putin’s brutal invasion of Ukraine, refusing to invest in defense seems disturbingly naive, especially if you’re Swedish (Russia annexed swathes of the country’s territory during the Great Northern War 1720s and, as we discovered, Putin has a long memory). It may look good in an annual report, but it’s not so good when filming begins.
Yet it’s not just that the investment giants need to change their policies. There is a more important point than that. They should never have allowed themselves to become so tied to woke, politically correct movements in the first place.
Why? Because they are terrible at making political judgments. It has never been wise to insist on an end to fossil fuel investment or forcing companies to commit to carbon neutral targets before alternative energy sources are ready to replace them. All that happened was that activists could buy a few stocks they felt like targeting, submit increasingly extreme and unrealistic motions, and companies like BlackRock would simply buy into it. If they didn’t, they would end up looking bad.
Likewise, condemning arms manufacturers and refusing to hold shares in any company supplying arms to any of the NATO powers was a childish and pacifist form of policy. It’s no big surprise when the student union at a second-rate university votes to end the arms trade. A great investment firm should be able to understand that if you disarm unilaterally – what that meant in practice – you were only encouraging aggressors like Putin. It’s just naive and silly.
Of course, it’s great that some of the larger investment firms have grown a bit and reversed some of the crazy demands they were making of companies. Business leaders will no doubt breathe a sigh of relief. Capital markets will work a little better, with money starting to flow to sectors that badly need it.
But they should learn a bigger lesson from the past few years of hyper-activism and jump on all the fad trains promoted by their millennial employees.
Beyond a few simple rules such as refusing to invest in companies that break the law or allow corruption, asset managers should drop politics. It’s not their area of expertise and they’re not very good at it. They make mistake after mistake. Instead, they should go back to simply investing in companies that make a decent product, at a fair price, pay their staff and suppliers on time, and generate a good return for their shareholders.
That’s what they were supposed to do in the first place. And, heck, they might even turn out to be very good at it.