The ESG reset

A clip from Robinhood

By Robinhood Snacks, June 2, 2022.

Hey Snackers,

Vegas chapels are all shook up after Authentic Brands, the licensing company that controls Elvis’ name and likeness, ordered them to stop using Elvis impersonators in ceremonies — a major hit to Sin City’s $2B/year wedding biz. Less “Burning Love,” more “Crying in the Chapel.”

Stocks ticked down to kick off the month, as investors keep rate-driven recession fears top of mind. US job openings dropped by 455K in April, but there’s still a massive gap between open positions and available workers (nearly 5.5M more jobs).

1. Deutsche Bank’s under investigation over greenwashing allegations as the ESG investing boom implodes

Green-washed up… More trouble at Germany’s biggest bank: for the second time in a month, authorities raided scandal-plagued Deutsche Bank’s Frankfurt HQ. This time it was to investigate allegations that DWS, an asset-management subsidiary of DB, has been “greenwashing” (aka: misleading investors about its environmental, social, and corporate governance — or ESG). In the fall-out, the CEO of DWS said he’d step down.

  • ESG, meet SEC: The Securities and Exchange Commission began investigating DWS last year after an ex-employee said it fudged ESG info to woo investors (last week the SEC fined BNY Mellon $1.5M for misleading ESG claims).

Sustainable investment, unsustainable pace… ESG investing has exploded as investors demand socially responsible investment options. But ESG claims are unregulated and have been criticized as arbitrary. One example: the S&P’s ESG index includes oil giant Exxon, but not EV pioneer Tesla. Some have dismissed ESG investing as a “virtue bubble.” Now it may be bursting:

  • Going (less) green: BlackRock, an ESG pioneer (and the world’s biggest money manager), backtracked and said it would support fewer “constraining” climate proposals.
  • The rise of “anti-ESG”: Billionaires Peter Thiel and Bill Ackman recently backed Strive, an asset management firm that specifically avoids politics.

THE TAKEAWAY

This could be a Great Green Reset… the ESG strategy seems to be falling out of favor: after outperforming the S&P 500 in last year’s bull market, ESG funds are underperforming the S&P in this year’s downturn. But sustainable investment as a concept isn’t going anywhere: investors have already parked $41T in ESG funds. Instead, future ESG investors might seek more realistic forecasts — and play by stricter rules. Meanwhile, the SEC plans to keep cracking down on misleading ESG claims, though it still hasn’t standardized ESG criteria.

2. iRobot updates the Roomba’s “brain,” betting its OS can be a differentiator in the crowded smart-home space

Sounds like a sci-fi thriller… actually a vacuum company. iRobot is the publicly traded consumer robot biz famous for Roomba (aka: the popular self-driving vacuum). Its sales soared for a while during the pandemic as homebound and hygiene-conscious adults ordered smart vacuums to clean up after their kids. But iRobot’s US revenue growth has been slowing. Now:

  • New brain: iRobot just revamped its robo-vacuum operating system to lay the foundation for a more sophisticated understanding of your home life. iRobot Genius, its AI platform for smart vacuums and mops, is now iRobot OS.

Read the full article from Robinhood here.