ETF managers tout their low fees, but what if those low fees are justified? Instead of being a feature, what if low fees are an accurate representation of the value provided by the product? Consumers make value judgments all of the time, paying more for healthy foods than unhealthy foods or paying more for electric cars than comparable gasoline-powered autos. ETFs create some social problems, making them less worthwhile products to the growing ranks of socially conscious investors.
- Social consciousness is something most easily seen by its absence.
- Consumers pay more for ESG affirmative products and services.
- Enterprises that enhance their communities and constituencies are worth more.
- Passives are not socially responsible investments and their fees should be low as a result.
Does the degree of social responsibility have a significant impact on what a business’s product is worth? Does citizenship matter? Answers to these questions have proven difficult, in part, due to a lack of agreement on what social responsibility entails. Is there value in discouraging longstanding anathema to Socially Responsible Investing (SRI), liquor, tobacco, and weapons? Tax and regulatory regimes suggest so. However, does that constitute social responsibility? Many social investors think not. Instead, some look to measure a firm’s interest in the health of its communities and the benefit to broad constituencies (customers, employees, investors).