Harry And Meghan Buy Into Fledging Ethical Investment Industry
News that Prince Harry and Meghan, the Duchess of Sussex, have a new role as “impact officers” at ethical fintech firm Ethic comes at an awkward time. Just a day after the announcement, data revealed U.S. investors are the world’s least interested in ethical investing.
Just 64% of U.S. investors used ESG (environmental, social and governance) factors when making an investment decision last year, according to a survey conducted by Royal Bank of Canada Global Asset Management (RBC GAM).
By comparison, over three quarters of Asian investors and 94% of Europeans considered such ethical issues when investing their money. And while their rates are rising, the percentage of investors considering ESG in the U.S. has fallen consistently over the last three years.
Donald Trump has a lot to answer for, says Melanie Adams, head of Corporate Governance at RBC GAM. The Trump administration barred retirement and pension plans from considering ESG factors when selecting investments, a decision that is only now being contested. “There was a big pullback during the Trump administration,” says Adams.
But, regardless of Trump, data shows a quarter of U.S. investors expect ESG portfolios to underperform their non-ESG counterparts. Ethical investments, they believe, would make less money. Anyone investing for maximum profit would therefore have to put their money into non-ESG stocks like oil and gas.
None of this bodes well for Harry and Meghan, who not only invested in Ethic earlier this year but also have their own managed portfolio with the New York-based startup, where, according to its marketing materials, “all investing is sustainable investing.”
The size of Harry and Meghan’s portfolio at Ethic is unknown, but the average account there is believed to be around $2 million, and the average investment during its series B funding round in March was $4.1 million. The firm manages a total of $1.3 billion between fewer than 1,000 clients. (Ethic did not respond to requests to verify these figures.)
Ethic invests according to each client’s preferences. Among the 19 issues that new investors pick from when signing up are things like “animal welfare,” “climate change,” “LGBTQ justice,” and “corporate diversity and inclusion.”
An Ethic spokesperson said preferences like these define each client’s portfolio. “We allow our clients to choose the environmental, social and governance issues that are most important to them and then help them create custom portfolios based on their preferences–not ours,” a spokesperson told the Telegraph.
Many of these issues chime with Harry and Meghan’s goals. In a joint opinion piece for The Washington Post, the Duke and activist Reinhold Mangundu argued against plans to drill for oil and gas in the Okavango River Basin. “We believe this would pillage the ecosystem for potential profit,” they wrote.
However, these issues are out of sync with the wider investment community. Most ESG-tied investments are made towards anti-corruption, cyber-security and climate change, in that order, with the latter dropping one place since the same RBC GAM survey was conducted a year ago.
The U.S. had the largest number of respondents saying that climate change was “immaterial” to their decisions. LGBTQ justice did not rank.
What Will Harry and Meghan Do As Impact Officers?
Ethic did not say what exactly Harry and Meghan will do as impact officers. However, in a press release, the company said “they want to shine a light on how we can all impact the causes that affect our communities.”
This implies some sort of ambassadorial role, which might promote the idea of ESG investing among an increasingly skeptical audience in the U.S. Their campaigning might be able to convince more investors to think about ESG factors when buying into companies and funds, or at least bump climate change up the agenda.
It is not only the investment community that needs to be convinced, but everybody with money to invest. In an interview with the New York Times
However, things might be already starting to change regardless of Harry and Meghan’s new job. “I think we are starting to see more and more recognition in the public,” says Adams. “We sent the survey out last spring, so it would be interesting to watch over the next few years how the survey plays out.”