At the beginning of each year, Just Capital releases the “Just 100,” a list of American companies that operate in the most “just” manner. It is an interesting list this year, with some names that you might expect, and others that are quite surprising given their industry, history, and reputation. This list is one investors should pay attention to, whatever their political preferences may be.
The criteria for inclusion are based on a poll of the American public as to what they think is important, and that list is itself quite revealing. Paying a fair wage came out on top this year, alongside things like workforce retention, training, and ethical leadership, with the more commonly cited ESG criteria like carbon reduction and pollution control towards the bottom of the list. That will surprise a lot of people, particularly the critics of ESG investing who always seem to focus on the environmental aspects of the idea. I guess it is just easier to mock concern for the planet than it is to convince people that paying a decent wage to workers is wrong, or that companies retaining workers and creating jobs in the U.S. are parts of some Deep State plot to take away freedom.
A lot of those critics also seem to think that the Just 100 is some kind of list of lefty companies, but many of the names on it bely that take. There are, for example, two prominent weapons manufacturers on the list, as well as some oil exploration and production (E&P) companies. Neither of those industries is considered a hotbed of liberal thought. Then there are some traditionally conservative, southern regional banks, and, most surprising to me, Duke Energy (DUK). A few years ago, when I lived in North Carolina where DUK is based, they were best known for fighting environmentalists in the state who were concerned about coal ash pits polluting the water supply. The fact that they are in the Just 100 a few years later points to a massive turnaround and/or a list where environmental concerns are no longer a big priority.
Sure, the usual suspects, big tech companies like Microsoft (MSFT) and Apple (AAPL), are in the top ten, but the list also contains many companies with a much more conservative reputation and donation profile. Around two thirds of the money donated to candidates by Truist Financial (TFC), for example, went to Republicans, with significant donations made to conservative PACs such as Club for Growth. And that is just one example. There are plenty of other decidedly right-leaning companies in the Just 100.
What matters to me in my role here, though, is not the politics, but the performance. How did the 100 stocks on the list do compared to the broader market? The answer depends to some extent, as it always does, on what time period you look at, but generally the list as a whole has outperformed the S&P 500. Investors should, however, be careful not to read too much into that. Over, say, the last 3 years, the S&P 500 has gained 18.9%, compared to 19.1% for the Goldman Just Investing ETF (JUST). That is hardly conclusive, especially when you consider that the American Conservative Values ETF (ACVF) has gained 25% over the same period.
Of course, there are reasons other than just politics for that. Most notably, energy is overrepresented in ACVF and JUST has a techier bias, as you might expect, and those two sectors have performed differently over the period. XLE, the energy sector ETF, has gained 47% over that three-year period, whereas XLK, its tech equivalent has gained only 32%. That alone could account for the spread between JUST and ACVF.
Lists such as the Just 100 or funds such as ACVF are there for those for whom politics trumps performance. They satisfy the desire to put your money where your beliefs are. But if you do that, understand that no matter how much you may try to convince yourself or others that it is a logical financial decision, you are not investing based on likely return. The evidence so far is inconclusive. Supporters of ESG may point to the success of companies that embrace the idea, while opponents could say that the success of ACVF clearly shows that such concerns might be holding a company back.
The logical conclusion is that there is a bit of both going on. In the short-term, companies that focus solely on profit will do better, while over time, those that keep their workforce and customers happy will outperform. Looking at the political diversity of the companies that make up this year’s Just 100, including those companies in your long-term plans, is something that every investor should do, whatever their views on ESG.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
Martin Tillier
Martin Tillier spent years working in the Foreign Exchange market, which required an in-depth understanding of both the world’s markets and psychology and techniques of traders. In 2002, Martin left the markets, moved to the U.S., and opened a successful wine store, but the lure of the financial world proved too strong, leading Martin to join a major firm as financial advisor.
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