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Your Survival Guy Never Buys ESG Funds Ever

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By Dmitry Demidovich @Shutterstock

You’ve been reading about my concerns with ESG investing for a while now. Mutual Funds and ETFs that virtue signal about this stuff are taking their eye off the ball. If you’re in some of these fee gathering mutual funds/ETFs maybe it’s time to look for greener pastures. Andy Kessler writes in the WSJ:

Larry Fink, CEO of BlackRock, which has around $10 trillion in assets under management, wrote in a letter to CEOs, “We focus on sustainability not because we’re environmentalists, but because we are capitalists.”

Let’s look inside. BlackRock’s ESG Aware MSCI USA ETF has almost the same top holdings as its S&P 500 ETF with Apple, Microsoft, Amazon, Alphabet, Tesla, Nvidia, JP Morgan Chase, Johnson & Johnson and United Healthcare, dropping Berkshire Hathaway and moving Meta and Home Depot to higher weightings. Fees on ESG Aware are 0.15%, or 15 basis points. BlackRock’s plain-vanilla iShares Core S&P 500 ETF index fund charges only 3 basis points. That’s right, BlackRock charges five times as much for juggling a few names and slapping ESG on the name. Capitalists indeed. As of June 30, ESG Aware was down 23.7% vs. down 20% for the S&P 500 index.

Look away if you’re squeamish, but BlackRock helpfully notes that the S&P 500 has investments of 0.92% in controversial weapons, 0.59% in nuclear weapons, 0.68% in tobacco and 0.12% in United Nations Global Compact violators. Yikes. But not the BlackRock Sustainable Advantage Large Cap Core Fund, an actively managed fund with none of that icky stuff. On May 31 its top holdings were similar to the S&P 500 with lower weightings of Berkshire and UnitedHealth and increased weightings of Visa and Exxon. Exxon! Gross fees were 0.74% and net fees of 0.49% as BlackRock chooses to waive some fees. This fund was down 20.6% as of June 30.

So yes, you’re paying someone five to 15 times as much to adjust some weightings and perform worse. For BlackRock, ESG and sustainable investing don’t seem to be about responsible or socially just investing, they are simply a lucrative business model.

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E.J. Smith - Your Survival Guy

E.J. Smith is Founder of YourSurvivalGuy.com, Managing Director at Richard C. Young & Co., Ltd., a Managing Editor of Richardcyoung.com, and Editor-in-Chief of Youngresearch.com. His focus at all times is on preparing clients and readers for “Times Like These.” E.J. graduated from Babson College in Wellesley, Massachusetts, with a B.S. in finance and investments. In 1995, E.J. began his investment career at Fidelity Investments in Boston before joining Richard C. Young & Co., Ltd. in 1998. E.J. has trained at Sig Sauer Academy in Epping, NH. His first drum set was a 5-piece Slingerland with Zildjians. He grew-up worshiping Neil Peart (RIP) of the band Rush, and loves the song Tom Sawyer—the name of his family’s boat, a Grady-White Canyon 306. He grew up in Mattapoisett, MA, an idyllic small town on the water near Cape Cod. He spends time in Newport, RI and Bartlett, NH—both as far away from Wall Street as one could mentally get. The Newport office is on a quiet, tree lined street not far from the harbor and the log cabin in Bartlett, NH, the “Live Free or Die” state, sits on the edge of the White Mountain National Forest. He enjoys spending time in Key West and Paris. Please get in touch with E.J. at ejsmith@yoursurvivalguy.com