Bill Davis is the founder and Portfolio Manager of Stance Capital. This company mitigates material ESG risks, produces excess returns, and is dedicated to ensuring that public equity portfolios can align with capital and personal values without sacrificing performance. I welcome him to this week’s show to talk about Stance Capital, how it helps its clients, and greenwashing. See more +

Bill Davis is the founder and Portfolio Manager of Stance Capital. This company mitigates material ESG risks, produces excess returns, and is dedicated to ensuring that public equity portfolios can align with capital and personal values without sacrificing performance. I welcome him to this week’s show to talk about Stance Capital, how it helps its clients, and greenwashing.

Greenwashing

I ask Bill to define greenwashing and explain why it is a major problem in ESG. According to Bill, greenwashing is when companies make promises to preserve the environment, which is not true. Greenwashing is “a marketing claim that does not back up reality,”. It’s an important issue in ESG because we expect companies to be socially responsible. “There is an ethical partnership that goes beyond the basic contract, and when it isn’t done, it adds a level of frustration,” Bill remarks. I commented that he started to seriously think about the environmental aspect of ESG when he looked at his children and thought about what kind of world they were inheriting. He talks about the importance of sustainability and the “very real threat posed by climate risk” and urges major companies to act quickly to reverse the effects of climate change.

Chasing Shiny Objects

Bill believes that the surge in greenwashing today stems from the large number of companies who want to brand themselves as environmentally friendly without adequate preparation. He says, “I think it’s just chasing shiny objects; I think lots of firms rush to the market with a product because they see that it is in demand – however, they don’t understand the product.” However, there is an even more dangerous issue of greenwashing: some companies blatantly mislead the industry or investors by marketing their product as fossil-free, although it contains fossil fuels.

ESG in Russia

Bill and I discuss how the Russian invasion of Ukraine impacts ESG and how it ties into greenwashing. Bill points out that it’s difficult to discuss only the environmental aspect as Russia also has numerous social and governance issues. He notes that several companies that claim to be environmentally conscious and pro-ESG work with other businesses that have worked intimately with Russia over the years. He believes that this is the fault of ESG rating data. “They’re not doing a full job and understanding what they’re buying. And secondly, I think it’s part of the nature of the world – as things are happening so quickly – that sometimes it’s difficult to think of everything in advance.” As an ESG data analyst or fund manager, you should consider current events so that when the next event happens, you can respond more nimbly. See less -