3 stocks that are surprisingly unethical

Bryce Leske: [00:01:38] Welcome to another episode of Equity Markets, a podcast that follows our journey of investing, whether you're an absolute beginner or approaching Warren Buffett status, our aim is to help break down your barriers from beginning to dividend. My name is Price and as always, I'm joined by my equity buddy Ren. How are you going? [00:01:53][14.9]

Alec Renehan: [00:01:53] I'm very good Bryce, very excited for this episode, as always. Just the two of us today. [00:01:58][4.8]

Bryce Leske: [00:01:59] Yes. Well, that's generally what happened on Monday. [00:02:01][2.2]

Alec Renehan: [00:02:02] Yeah, we do interviews. We do, yes. Two of us. I don't know. [00:02:05][3.9]

Bryce Leske: [00:02:09] Well, thank you for setting the same. Well, I'll set the context today. We're discussing we know ESG is an important sematic that is not going anywhere, that's for sure. [00:02:18][9.6]

Alec Renehan: [00:02:19] Unless you have your wife and. [00:02:20][1.2]

Bryce Leske: [00:02:21] No, and and, you know, for a lot of the members of the equity markets community, it's an important part of their investing journey. So we're going to do our best to continue to discuss it where we can. And in today's episode, we're going to be looking at three stocks that are surprisingly unethical on surface level. They may appear or you would be surprised if they fall in the unethical basket. [00:02:44][23.0]

Alec Renehan: [00:02:44] Yeah, the reason that we're doing this episode is we recently did that Woolley's demerger episode. And I think a lot of people who aren't too familiar with Woolworths as a business were surprised that this supermarket retailer that paints itself green and it calls itself the fresh food people has, what, two thousand poker machines sitting in its back pocket that it doesn't really talk about, but is a big part of [00:03:12][27.6]

Bryce Leske: [00:03:12] what definitely talks about [00:03:13][0.8]

Alec Renehan: [00:03:13] them? Well, they don't really like to talk. [00:03:15][1.7]

Bryce Leske: [00:03:16] That's why they're getting rid of it. [00:03:17][1.2]

Alec Renehan: [00:03:18] And it just shows that, like the image of the company presents or the main business that a company does is you need to go deeper than that. If you want to really find out if a company is ethical and meets all your ethical screens. And so we set out to try and find three companies that were similar to Woolworths that maybe had an unethical surprise lurking in the corner. You know, one thing that we often talk about is that you really if you're going to buy an ethical ETF or an ethical fund, you really have to look at what they're holding. Yeah, there are three major ethical ETFs that invest in international stocks in Australia, one from beta shares, one from Vanguard, one from Vannak. One of them holds all three of these surprisingly on ethical stocks. Can't wait and a number of other surprisingly unethical stocks can't wait. [00:04:09][50.9]

Bryce Leske: [00:04:09] So I bet I know which one it is before even if before we even get to it. [00:04:13][3.4]

Alec Renehan: [00:04:13] Well, let's let's not let's not reveal now, but. Well, I don't know. You'll have your chance to guess. [00:04:18][5.3]

Bryce Leske: [00:04:18] I reckon I know which one it is. [00:04:20][1.1]

Alec Renehan: [00:04:20] Well, let's go. Yeah, let's go. So how this episode is going to work, let's talk about these three companies, um, what they do. And then I'm going to ask you to guess how they're unethical, what the unethical surprises. Or we can just talk about it if you don't want to guess [00:04:40][20.1]

Bryce Leske: [00:04:41] what I mean. Yeah. Let's see how it pans out. [00:04:44][2.5]

Alec Renehan: [00:04:44] Okay. And then let's talk about these three ETFs, because it's a really good example of how you have to look below the surface. So let's start first company that is surprisingly unethical by. Have you heard of it? [00:05:02][17.5]

Bryce Leske: [00:05:03] Yeah, of course. Yeah. [00:05:04][0.7]

Alec Renehan: [00:05:04] Massive pharmaceutical co, massive pharmaceutical company, life sciences company, one of the largest pharmaceutical companies in the world based in Germany, has three key business areas, pharmaceutical segment. They I think they invented aspirin or they commercialized aspirin, like that's one of their big brands. But they do a whole bunch of stuff, cardiology, therapeutics in areas of oncology, hematology, ophthalmology, bla bla bla. Consumer health segment, a lot of over-the-counter medications, pharmaceutical products, skin care, nutritional supplements, all that stuff. CropScience segment offers chemical and biological crop protection products, different seeds, all that stuff has a collaboration with a bunch of different companies to develop cancer drugs, new therapies, a whole bunch of stuff. So pretty standard pharmaceutical and life sciences company so far, nothing unethical at this point. I had a look at Tica pulled out some of its numbers. Market cap, sixty three dollars billion US fifty billion US dollars in revenue. It actually lost twelve and a half billion dollars last year because of covid. But normally it makes about four and a half billion dollars in profit a year. So massive company, according to simply Wall Street. It's trading sixty two percent below their calculation of fair value, which is surprising for a company that this. Yeah, um. So I think. How that number came together, but a pretty, pretty stock standard pharmaceutical company, I mean, people some people would say pharmaceutical companies, per say, are unethical. I don't know where you sit on that. Yeah. [00:06:48][104.6]

Bryce Leske: [00:06:49] So I'm surprised this is on the list because I, I do you think these are put most pharmaceutical companies really on the the weighted more towards an unethical side. Yeah. Yeah, more. I'm not saying they all are and X, Y and Z but I feel like if I was to have to draw a line they'd be slightly leaning. [00:07:11][22.2]

Alec Renehan: [00:07:12] Why. Oh why is that. [00:07:13][1.1]

Bryce Leske: [00:07:13] I just feel like their corporate behavior and pursuit of profit is disgusting [00:07:21][7.2]

Alec Renehan: [00:07:22] and we have just lost all potential pharmaceuticals. That's fine because I don't know how many of you and. But don't you don't you think our quality of life [00:07:32][10.1]

Bryce Leske: [00:07:33] of course, there's that side and I'm not going to debate that because there's no doubt. There's no doubt. But I think it could be a hell of a lot better and more accessible if they approached it with less of a corporate lens and more of a we're doing this for society lens. [00:07:50][17.3]

Alec Renehan: [00:07:51] Yeah, OK. Does that make sense? Yes, it does. Yeah. I mean, I just think that these companies I think every company is just a dumb unit of following incentives and trying to maximize profit within that context. I think a lot of the criticisms of pharmaceutical companies at their core, really criticisms of the regulatory environment, intellectual property protections, how we incentivize these companies and how they direct their R&D budgets based on those incentives. But anyway, yeah, let's let's let's for the purposes of this discussion, say that pharmaceutical companies aren't all unethical. [00:08:29][38.3]

Bryce Leske: [00:08:30] Yeah, sure, sure. Before we do move on as well, you've mentioned Tica there. Let's just remind the equity rights community on how we can get access to that. [00:08:39][9.5]

Alec Renehan: [00:08:39] Yeah. So, Teka, if you're in, it's currently in beta so you can access it through the front door. But if you want to access it for free ticker dotcom slash equity meit's. [00:08:49][9.5]

Bryce Leske: [00:08:50] Yes. And it's t i. Good point. [00:08:52][2.2]

Alec Renehan: [00:08:52] Hey Tequilla. And we use Tica for all of the raw data. Every company around the world will. At least every company I've ever needed to search is on their transcripts of calls with CEOs and analysts and stuff like that, really good resource to get some raw data. [00:09:10][18.4]

Bryce Leske: [00:09:12] So, yeah. Yeah, amazing. All right. [00:09:14][1.6]

Alec Renehan: [00:09:14] So they are a pharmaceutical company, Lifesciences. It has a little unethical surprise in there if you dig deep enough. [00:09:21][7.0]

Bryce Leske: [00:09:22] My feeling would be and this is without looking at any notes, but I know my feeling would be that it would be related to the CropScience part of the business. You, correct? Yeah, because I know that they did a dirty deal with with Monsanto. You get to get it. [00:09:42][19.3]

Alec Renehan: [00:09:42] Monsanto, Monsanto. [00:09:43][1.5]

Bryce Leske: [00:09:44] Monsanto. Yeah. Who are very honest. [00:09:46][2.5]

Alec Renehan: [00:09:47] Very unethical. Oh so yeah, this is the unethical surprise. If you peel back the layers of the corporate structure. Monsanto Bayer first bid for in 2016, close the deal in twenty eighteen. Monsanto is was a leader in genetically modified crops. And there's a whole bunch of issues about how they've aggressively protected their intellectual property around these GM crops and stopped farmers using organic seeds and a whole bunch of stuff. But there's a particularly unethical element to Monsanto will now are at the moment, which is Monsanto's leading herbicide called Roundup. [00:10:32][45.1]

Bryce Leske: [00:10:32] And the cancer started [00:10:33][1.0]

Alec Renehan: [00:10:34] the cancer stuff. Yeah, they have been sued by a number of people because they alleged that roundup caused cancer and specifically glyphosate phosphate in the in the product. [00:10:46][12.5]

Bryce Leske: [00:10:47] Didn't didn't the US school garden or something. He got really sick from it and walked and managed to sue them for hundreds of millions. Yeah. [00:10:56][8.8]

Alec Renehan: [00:10:57] So that there was a couple of leading cases, that being one of them. There's now a hundred and twenty five thousand cases. Wow. Yeah. But bio remains committed to round up as a home and garden product as well because [00:11:09][12.2]

Bryce Leske: [00:11:09] they just deny it on it. [00:11:10][0.9]

Alec Renehan: [00:11:10] Yeah. Well I think they can't really deny it so much because the courts have basically said it's a problem. Looking at actually looking on Tica, I was reading the transcript of their latest call with analysts and they said they were reviewing the use of glyphosate in home and garden products. But they're not walking away from it yet. They're not walking away from it for industrial agriculture. And it's just it's just this little business. Well, it's actually not a business. It was like a 60 billion dollar business that is actually paying. It's kind of a terrible acquisition that they bought Monsanto for 60 billion. The buyer's market cap is now 60 billion, and they've lost half their value over the last couple of years. But, yeah, if you think of Bayer as a pharmaceutical company, makers of aspirin also would you know, makers of heroin, they commercialized heroin back in the day. Not the first to make it, but that tends to bring it to market. [00:12:11][61.1]

Bryce Leske: [00:12:13] Look, it's [00:12:13][0.2]

Alec Renehan: [00:12:13] done. You may not realize that. Beneath it all is Monsanto, this company that would go down in the pantheon of unethical companies. [00:12:25][11.7]

Bryce Leske: [00:12:26] Yeah, Fickell. [00:12:27][0.5]

Alec Renehan: [00:12:28] So that's one. And let's put a pin in that, because we will come back because Bayer is held in one of those three. Now let's get into the show. So, Bryce, second company, you might actually think this one's unethical straight off the bat, Nestlé ethical or unethical? [00:14:00][91.8]

Bryce Leske: [00:14:00] It's interesting you say that. I mean, I don't really know enough about it. I'm a Cadbury man. Really? I'm a cavalryman. And what's the New Zealand chocolate Whitakers? [00:14:11][11.0]

Alec Renehan: [00:14:14] You're too fancy for my blood, [00:14:15][1.3]

Bryce Leske: [00:14:16] but I imagine this is to do with the supply chain. I would assume [00:14:23][6.3]

Alec Renehan: [00:14:23] you would assume there are criticisms, but cocoa. Okay, let's. So I as I was doing, some part of the reason I wanted to include Nestlé is just I want to tell you how big it is. OK, so get ready. Strap yourself in. So it's the largest food company in the world measured by revenue and other metrics. It's been the largest since twenty fourteen Swiss company still based in Switzerland. Twenty nine of Nestle's brands have sales of over one billion, a just like that's pretty impressive. They have over 8000 brands operating, one hundred ninety four countries. But I want to give you a list of a lot of the brands they own because it's just it's pretty mind blowing how big they are. So they offer baby food under SILLIAC Gerber and Naturalness brands. Probably not relevant for us. You soon maybe be bottled water under Nestlé, pure Perrier, Poland Spring Spirit Pelligrino Legrain, New Star Trek, Cereal's and Fitness Nesquik, Cheerios Lion Cereals Brand. And there's a number of cereals under that Lions brand. Chocolate and confectionery confectionary under Kit Kat, Nestlé, La Atila, Nestlé, Tollhouse Milk Bar, Smarties Quality Street Area. Gary are a few others that I can't even pronounce coffee on the next cafe Nespresso. Which of those pods that you love? Nest Cafe. A bunch more Starbucks brand coffee is made by them like frozen foods on the Maggi Hot Pockets stuff, La Thorney Jacks Tombstone, a few others that I can't pronounce. Lean Cuisine Dairy and Connacher Coffee made a few other brands so we don't have in Australia drinks under my Nesquik, Nestlé, a few others. The list keeps going on. Basically, name a food category, they have five brands at the very least category, walk down a supermarket shelf, throw a dart, you'll probably hit a nest Nestlé product, toilet paper. I didn't say it, but I bet you they have that. They got pet care. They got pet care. PURINA Well, they got what [00:16:40][136.2]

Bryce Leske: [00:16:41] it's pretty as a lot of European brands, like, I think it's bigger than it would be bigger in Europe than penetration here in Australia. I reckon probably [00:16:50][9.2]

Alec Renehan: [00:16:50] bigger big in America as well. But the takeaway from this is this company is everywhere. This company is huge. This company has made food that you will eat this year. This week. Today, probably. [00:17:04][13.4]

Bryce Leske: [00:17:05] Yeah. You eat Maggiano's every day. [00:17:07][1.3]

Alec Renehan: [00:17:07] So once you start the day with focus groups of Miloje no milk and to give you some numbers. So I jumped on Tica had a look. Three hundred and fifty-six billion dollar US US dollar market cap, massive company. Eighty-four billion dollars in revenue a year, 12 billion dollars in profit according to simply Wall Street. It's trading twenty three below twenty three percent below its estimate of value again. So right. Yeah. [00:17:34][27.4]

Bryce Leske: [00:17:35] Probably cuz of Covid I reckon. Oh, that doesn't make any sense actually. [00:17:38][2.5]

Alec Renehan: [00:17:38] No actually Nestlé did really well during the day because their profit stayed very stable. Yeah. All the chunky bar. But Nestlé will look. Nestlé has a number of controversies, but among it all there was one very unethical surprise that I felt. [00:17:57][18.6]

Bryce Leske: [00:17:57] Yeah, well, as I said, my my thinking leans towards supply chain somewhere within these businesses. But I feel like that's too obvious. Pet petcare. Maybe it's in how their animal cruelty is, I guess. Ice cream. No health care. Yeah. Look, I don't know. Those are my two guesses. If I was to have to lock them in in a million dollar question, are [00:18:30][32.4]

Alec Renehan: [00:18:31] are you getting fifty? Luckily, a million dollars is on the line. [00:18:36][5.0]

Bryce Leske: [00:18:36] I'd be going to a guess. [00:18:38][1.6]

Alec Renehan: [00:18:38] But look, you're both right. There are animal welfare, animal testing critiques, those supply chain critiques. There are water use and resource use critiques, all of which you would probably think would push it out of an ethical screen. But a reminder, it is in one of these ethical ETFs, no surprises. But that's not the unethical surprise that I found. It's Nestlé is the target of the world's longest consumer boycott. Oh, really? Yeah. Since nineteen eighty eight, there's been a massive global consumer boycott against Nestlé. [00:19:13][35.1]

Bryce Leske: [00:19:15] It's not working. [00:19:15][0.5]

Alec Renehan: [00:19:18] That is a fair point. [00:19:20][1.5]

Bryce Leske: [00:19:22] If it's the biggest food company in the world. [00:19:24][2.2]

Alec Renehan: [00:19:24] Yeah, that is fair. I mean, it's not a I mean, it is about Nestlé generally. There's like all these posters that you say, I've never seen one in Australia, but I would assume in Europe and where some of these countries where this stuff happened, which we'll get to in a second, there's like a whole like Nestlé free zone, like posters that go up in shop windows and stuff like that for [00:19:44][20.0]

Bryce Leske: [00:19:45] why Nestlé? [00:19:45][0.7]

Alec Renehan: [00:19:46] So the boycott is led by an organization called Baby Milk Action, and the organization says that Nestlé contributes to the unnecessary death and suffering of infants around the world by aggressively marketing baby food in breach of international marketing standards. And the organization says that Nestle's own internal report found one hundred and seven instances of noncompliance with its baby milk marketing policies in twenty nineteen. [00:20:14][27.7]

Bryce Leske: [00:20:14] But is there anything wrong with the product? [00:20:15][0.9]

Alec Renehan: [00:20:17] I think I think the well, the critique is that Nestlé aggressively markets infant formula to especially poor countries and they do things like give free samples of infant formula to mothers in the hospital. And then if you start your baby on infant formula, I think it affects how you lactate in those early days and then you're basically hooked on the infant formula and then you've got to charge. And then there's a charge and there's a whole bunch of stuff around that. Um, now, obviously, we do not have enough information on this to make definitive statements, but that's the day the allegations and the reports. But yeah, the target of the world's longest consumer boycott for what, twenty three years. [00:21:08][51.2]

Bryce Leske: [00:21:09] Yeah. Okay. So I get it. How many people in this boycott action didn't count. Yeah. Like I said, one person. [00:21:16][6.9]

Alec Renehan: [00:21:17] No. It's legit like the UN have done reports on it. Stuff, like it's the US Congress, has done reports on it like it's a legit [00:21:24][6.5]

Bryce Leske: [00:21:24] boycott and then what? They can't bring any action against Nestlé too big? No, no, no, no. If they're breaching rules like there's action that can be brought against any action Ren brought against them, or is it just a slap on the wrist? What you're doing is the technology within the rules, but it's it's a bit dirty. Is that what we think? [00:21:44][19.6]

Alec Renehan: [00:21:44] That's it. Yeah. OK, but isn't that what we do with most of these ethical screeds,. Sure. Mining coal is within the Ren. Yeah. Yeah. [00:21:51][6.6]

Bryce Leske: [00:21:51] But yeah, I'm not I'm not saying that it's not unethical. I was trying to get my head around it. Yeah. So there's actually nothing wrong with the product. It's not like they're giving out shitty. Correct. [00:22:02][10.5]

Alec Renehan: [00:22:02] It's right. They've got arsenic in their infant. Yeah. They do not have that. Let's be very clear. It's just the way that they push it, [00:22:09][7.0]

Bryce Leske: [00:22:09] they're quite, quite aggressive. OK, I wouldn't have picked that, but [00:22:13][3.5]

Alec Renehan: [00:22:14] that's why it's an unethical surprise. Yeah. Um, this last one, again, going on the theme of you probably already think it's unethical, but I struggle to find companies that were really ethical that had a bad, unethical surprise. Um, J.P.Morgan. OK, unethical, unethical. [00:22:35][21.0]

Bryce Leske: [00:22:37] Well, given the corporate cash cow that I am, [00:22:39][2.0]

Alec Renehan: [00:22:41] given how much we want Jamie Diamond to do an interview on equity, but [00:22:44][3.1]

Bryce Leske: [00:22:47] ethical, unethical, I haven't actually considered Jabe or any of those big banks. But I mean, if you I mean, if I, if I was putting a if I'm putting pharmaceuticals in there, you'd I'd probably be lending this one more on the unethical side. It's OK. [00:23:00][13.5]

Alec Renehan: [00:23:01] So for people who are unfamiliar with JP Morgan, quick set of facts. American Multinational Investment Bank, Financial Services Holding Company headquartered in New York today to be the largest or the second largest investment bank in the world. Number of business segments, consumer and community banking, corporate and investment banking, commercial banking, asset and wealth management. Um. Had a look on Tica, the numbers actually surprised me, market cap of half a trillion dollars, 500 billion. I didn't realize was that big. [00:23:37][36.1]

Bryce Leske: [00:23:38] Massive is the biggest investment bank in the world. [00:23:39][1.4]

Alec Renehan: [00:23:40] Yeah, yeah. Most biggest or second biggest, I think. I don't know how big Goldman is. Yeah, true. Yeah, it's big. It's big. It's not small. It's done pretty well. Revenue of one hundred billion. Profit of twenty nine billion. You've got to love those margins. Simply Wall Street again trading 10 percent below its estimate of fair value. I think the analysts that simply Wall Street are very generous estimates of fair value. [00:24:06][26.3]

Bryce Leske: [00:24:07] Well, I don't think they use analyst and they just pull it all in. [00:24:09][2.1]

Alec Renehan: [00:24:09] Maybe they're using current interest rates as the discount rate in kind, discounted cash flow. [00:24:14][4.8]

Bryce Leske: [00:24:14] Yeah, well, yeah. [00:24:15][0.7]

Alec Renehan: [00:24:15] You know, yeah. But I have to ask them. Yeah, we will. We will. And J.P. Morgan seems to be getting serious about climate change. Yes. Um, good. The US so recent announcement, the US company will source at least 70 percent of its own power needs from onsite renewables and off site long term renewable energy contracts by 2025, and also ensure that all of its company owned vehicles are electric by the same date, talking a lot about funding more renewables or reducing carbon intensity smokescreens. Maybe, maybe. So that's the company. It's an investment bank which has an unethical veneer to it, but it hasn't been criticized in the same way that Goldman has for, you know, some of the things that it's done and ethical. Or what do you think the ethical, unethical surprise is? [00:25:11][55.2]

Bryce Leske: [00:25:11] The easy route, I think, would be to say, look under the hood what they're investing in or who they're supporting. So that would probably be my first consideration if it was a million-dollar question. My second would then go to corporate culture and corporate governance. So, like how they treat their employees, maybe it's like the number one company in the world with the worst employee rating or something along those lines. So that's where I go. Oh, I like worst, you know, no females on the board or something along those lines. Am I right? [00:25:43][31.9]

Alec Renehan: [00:25:43] Well, you've given a lot of guesses that [00:25:45][1.7]

Bryce Leske: [00:25:45] are there to two large chunks, to a large chunk guess. [00:25:49][3.8]

Alec Renehan: [00:25:50] Yes, you're right. Your first guess, your first [00:25:53][3.2]

Bryce Leske: [00:25:54] which was under the hood, what they're investing and who they're supporting. Yeah. Yeah. [00:25:57][2.8]

Alec Renehan: [00:25:57] So you nailed it with the whole smoke screen around the carbon stuff. [00:26:01][3.8]

Bryce Leske: [00:26:01] Yeah, I feel like that's just so. [00:26:03][1.5]

Alec Renehan: [00:26:04] JP Morgan is the world's largest funder of fossil fuels. Bar none. Three hundred and seventeen billion dollars over the past five years into coal, oil and gas. Wow. Now, that's a big number. Biggest number in the world. You won't find a bigger number anyway. Um, but it's hard to put that into context. Like three hundred seventeen billion in the context of how much is being invested. Um, so I jumped onto Ticha and looked at Exxon Mobil and Saudi Aramco to give you some context in terms of how much they're investing to put it in comparison. So JP Morgan. Three hundred seventeen billion over the past five years into coal, oil and gas, a lot of that into new projects, exploration, Exxon over the past five years, seven billion in exploration and drilling over the past five years combined seven billion into exploring for new like oil and gas reserves and stuff like that, and actually drilling a fraction of what JP did. Saudi Aramco, the biggest oil company in the world, one point eight trillion dollar market cap, even a company that large that reliant on oil over the past five years, its exploration, drilling and R&D costs all combined 15 and a half billion. Wow. So just the amount of money that these oil and gas companies are investing in finding new reserves and drilling those new reserves is pales in comparison to these big investment banks. JP Morgan leading them in 2020 alone. JP Morgan put 51 billion dollars into fossil fuel financing. Compare that to, you know, the market cap of some of these big companies. [00:27:54][110.0]

Bryce Leske: [00:27:54] You know, it's an interesting one. I wonder if it'll come back to bite them in years to come. Like, what's their expected turnaround in these investments, I wonder? [00:28:03][8.4]

Alec Renehan: [00:28:03] I'm sure they do. [00:28:04][1.4]

Bryce Leske: [00:28:05] Yeah, yeah. It's it's interesting. Like, they're back. They're obviously clearly backing. I wonder what they're I wonder if they've gone the other way as well and have they've obviously put money into renewables I would imagine, but probably not to the scale. Yeah. [00:28:17][12.7]

Alec Renehan: [00:28:19] But like that people might be like saying well so what. That of course these big banks fund fossil fuel projects. We know that's the problem. But the point is that these three companies, Nestlé, JPMorgan, and Bayer, are all in one of these. [00:28:35][16.6]

Bryce Leske: [00:28:36] Oh, it's time to really it's time for grilling. [00:28:40][3.6]

Alec Renehan: [00:28:40] Before we reveal which one, we're going to take a quick break to hear from our sponsors. Price life is throwing a lot your way at the moment, managing a growing team, soon to be a growing family, and trying to keep me focused and productive every day. Not sure about [00:28:57][16.3]

Bryce Leske: [00:28:57] the growing family, but I can say that keeping you on the straight and narrow each day is a challenge here at the equity markets office. [00:29:03][5.9]

Alec Renehan: [00:29:03] Well, I may have found the perfect tool to keep me in line and to keep you productive. And that is the Microsoft 365 subscription, which will have you ready to take on whatever life throws [00:29:16][12.5]

Bryce Leske: [00:29:16] your way, which sounds appealing. Ren. You can get premium office apps and Outlook to boost your productivity, the All-In-One organizational hub. And that is something you definitely need. Plus to protect your important files and photos, which you and never let me look at and access them across your devices with one full terabyte of one drive cloud storage. So Ren, I guess the question is, how will you make the most of your time? [00:29:40][23.7]

Alec Renehan: [00:29:41] Well, I guess I'm going to start by going to Microsoft 365 dotcom to learn more, and really everything is going to come from that. OK, Bryce, back from the outbreak into the big reveal, so we've spoken about three companies and how if you look under the hood, you might find areas of their business, things that they're investing in, things that are happening around their business that may fall afoul of your ethical screen. So you really have to do the work and understand all aspects of a business. We started this conversation by saying there are three global shares, ETFs within the ethical screen. That was a confusing life. There are three ethical ETFs that invest in global shares. [00:30:34][52.9]

Bryce Leske: [00:30:35] There are a number of banks, more than three [00:30:36][1.5]

Alec Renehan: [00:30:36] sorry, not listed in Australia. There are only three. There's a number that invest in Australian shares. There's some that invest in Australian that invest in fixed income and stuff like that. Um. Oh, sorry. Sorry. The other the other clarification is large caps. OK. Yeah. Do that because there are some like small cap active ETFs and stuff like that. Now Brice's fact checking me so we might edit out a bit of time, but AAA is going to fact check me and he'll come back and agree with me. [00:31:06][29.4]

Bryce Leske: [00:31:07] Yeah. Cool. [00:31:07][0.3]

Alec Renehan: [00:31:08] OK, so the three ethical ETFs that focus on large cap international shares, Beda shares, global sustainability leaders, ASX Ticker et I then God ethically conscious International Shares ASX Ticker Vé S.J Vanik Vector's MSCI International Sustainable Equities ASX Ticker ESG. I am one of those funds. Have all three of these companies. Which do you think it is? [00:31:40][31.8]

Bryce Leske: [00:31:41] So I know that I know this is, this is going to sound funny, but my answer to this is purely based on the names here and the vaguest name is the Vanguard Ethically Conscious International Shares ETF. Veiga or Vannak, I just look, I think Vannak would have put more thought into what goes into that ATF, right? And I know that they're generally more concentrated. I could be very wrong, but I know that they're generally more concentrated equally. I'm pretty sure Abeta shares, given that they've also just booted Tesla. And we'll think about and we'll talk about that in a minute, but have probably done a bit more research. Ethically conscious international shares from Vanguard, I think give them the license to include as many companies as possible. [00:32:41][60.2]

Alec Renehan: [00:32:42] Well, you've absolutely nailed it. [00:32:43][1.1]

Bryce Leske: [00:32:43] Not really Vanguard. [00:32:45][2.1]

Alec Renehan: [00:32:46] So to give you some details, Beta shares and Vannak have between 200 and 300 companies in those ETFs. Vanguard have about sixteen hundred [00:32:58][12.5]

Bryce Leske: [00:33:00] sixteen hundred companies in that. [00:33:01][1.6]

Alec Renehan: [00:33:02] Yeah, yeah. Yeah I see. [00:33:03][1.2]

Bryce Leske: [00:33:03] What the hell like that. [00:33:04][0.8]

Alec Renehan: [00:33:05] I've got the full holdings here. [00:33:06][1.1]

Bryce Leske: [00:33:06] That's exactly my point. It's, it's just that they've, they've tried to create a Oh yeah. I've tried to create an ETF that well [00:33:15][8.9]

Alec Renehan: [00:33:15] they screened about 400 companies out of the investable universe apparently also looking on their website was over 2000 companies in the index. They screened out about 400. [00:33:23][8.0]

Bryce Leske: [00:33:24] No tobacco, no booze. Like that's probably [00:33:27][2.6]

Alec Renehan: [00:33:27] yeah. Maybe no oil companies directly. But this is this is where I think it becomes really important. It's like you don't have oil companies, but you okay. Yeah, yeah, yeah. Um, so I went a bit deeper, scrolled down the list, compared the three. I'm going to throw out a couple more companies. You tell me if you think they should sit in or out of an ethical ETF and I'll tell you which ones to indict. OK, Coca-Cola out of beta shares has it out. Vanguard has it in that. It has it out. Yeah. [00:33:59][31.4]

Bryce Leske: [00:33:59] Water is one of the biggest consumers of water in the world. Yeah. [00:34:02][3.3]

Alec Renehan: [00:34:03] And also, I guess there's a question around, like selling sugary drinks to kids in a big city and all that stuff. [00:34:08][5.7]

Bryce Leske: [00:34:09] And God has coke in Boeing in. [00:34:13][4.6]

Alec Renehan: [00:34:14] Yeah, I don't actually have that much problem with Boeing. Obviously, they have had a difficult recent recall. Yeah. None of them have Boeing in the. Wow. Yeah. [00:34:23][9.5]

Bryce Leske: [00:34:24] Weapons like what. [00:34:25][1.1]

Alec Renehan: [00:34:26] Oh you know what, you've absolutely nailed it because we're thinking of the Civil War. Yeah. But they also create weapons for the US military. That is a very good point. American Express [00:34:38][12.1]

Bryce Leske: [00:34:39] in [00:34:39][0.0]

Alec Renehan: [00:34:40] credit cards in Yeah. Beta shares has it in then God has it in neck does not have it in nice Electronic Arts, the one of the most hated companies in the world famous for the loot box for those gamers out there. [00:34:57][17.2]

Bryce Leske: [00:34:57] Aetate in the game. Yeah, yeah, yeah, yes. It's got to be and it's got to [00:35:02][4.2]

Alec Renehan: [00:35:02] be in it is not in beta shares in the other two. [00:35:05][2.8]

Bryce Leske: [00:35:05] Why I wonder. [00:35:06][0.5]

Alec Renehan: [00:35:06] The loot boxes are talked about as equivalent to gambling in some senses. [00:35:11][4.9]

Bryce Leske: [00:35:12] I don't know the loot [00:35:12][0.5]

Alec Renehan: [00:35:12] but yeah I don't really know either. But I was writing about that. I also think they don't treat uh this is all from what I've read, but their relationships with some of the smaller game developers that they contract to apparently is a little bit fraught at times. Interesting. Uber and Lyft, let's do them together. Out, out. Why our [00:35:34][21.8]

Bryce Leske: [00:35:35] treatment of contractors or [00:35:37][2.4]

Alec Renehan: [00:35:38] drivers? Yeah, I tend to agree. Out of beta shares. Out of Vannak [00:35:42][4.5]

Bryce Leske: [00:35:44] in that Vanguard, Vanguard, Vanguard. [00:35:46][2.2]

Alec Renehan: [00:35:47] This shouldn't be like we don't want this to be we're just not we're not ready. We are. We feel that, you know, this is Vanguard. [00:35:53][6.0]

Bryce Leske: [00:35:54] I think you. Oh yeah. Well, I think the the key message here, as always when we talk about ASG is that it means different things to different people. And as far as this thematic grows and integrates into everyone's investing journey, I think we're going to see more and more sort of concentration as the years go on. But for now, it's not surprising that there's such divergence between product and, you know, everyone's doing different things and smoke screens everywhere at this stage. [00:36:26][32.4]

Alec Renehan: [00:36:27] So, yeah, now this [00:36:28][1.4]

Bryce Leske: [00:36:28] is purely just to continue to highlight the challenge that everyone faces when it comes to ethical investing and the difficulties in actually trying to look under the hood. [00:36:37][9.3]

Alec Renehan: [00:36:38] So I think this is a really good Segway into what is perhaps the most controversial company that, uh, that you wanted to talk about, which is Tesla. [00:36:49][10.9]

Bryce Leske: [00:36:49] Yes. I don't think it's the most controversial, but this is hot off the press. We're recording this on the 10th of June. And only yesterday it was announced that Beta shares, one of the largest providers of ETFs here in Australia, have removed Tesla from. Their sustainability, ATF citing that the carmaker has failed to address labor and environmental concerns. Now we know we spoke to Adam Fareway from Future Super last year and I think they booted Tesla as well or didn't even have them in for very similar reasons around labor and the environment. Quite ironic, given that Elon has been tweeting about the environmental impacts of mining Bitcoin. [00:37:31][41.8]

Alec Renehan: [00:37:32] Well, quite ironic that Tesla has moved the Overton Window in terms of how we make cars, how we think about cars. The second-order effects of what Tesla has done will be significant improvement. [00:37:45][13.0]

Bryce Leske: [00:37:46] Yeah, yeah. So, look, it's been dumped from the ethe, as we've spoken about as the ticker. And I think it's just a testament that these companies or these ETF providers to keep their finger on the pulse. But if you're invested in that ETF because of Tesla. Sorry. Yeah. [00:38:08][22.3]

Alec Renehan: [00:38:08] Yeah. Well, I mean, if you're investing in any ETF because of one individual company, um, examine your thesis. [00:38:16][7.6]

Bryce Leske: [00:38:17] Yeah, yeah, yeah. But if you for example, say Ren just to close that out, you know, around their labor. A quick example is that the most recent is during covid last year when everyone was at home. Tesla reopens their factory in California despite local authorities warning against it, enforced quite a large contingent of their labor force back in. And subsequently, a lot of them got covid. So that's just one example, I guess, of many which have led to the decision to remove them. [00:38:48][31.1]

Alec Renehan: [00:38:48] Now, given we have these ATF holdings here, so obviously Tesla no longer impetuses, Effy one. What are you hearing about the other two? [00:38:58][10.1]

Bryce Leske: [00:38:59] Well, I'd have to say it's in Vangard. [00:39:00][1.3]

Alec Renehan: [00:39:01] Yeah, it's in up [00:39:02][1.0]

Bryce Leske: [00:39:03] and yes, in Vannak. [00:39:05][2.5]

Alec Renehan: [00:39:06] Yeah, I would have thought yes, but no. [00:39:08][1.4]

Bryce Leske: [00:39:08] Oh, nice. [00:39:08][0.5]

Alec Renehan: [00:39:09] Yeah, nice. Um, yeah, I've we've said this so many times but you just got to look under the hood of these products. Same with like the active ETFs that you can get there, like smallcap ethical active ETFs. Look at what [00:39:25][16.1]

Bryce Leske: [00:39:25] they hold, not only look under the hood, but then it's fair to say that and it's easy if you're looking under the hood, it's like what's in the ASX 200? The challenge with these is looking under the hood and then actually deciding whether or not those companies should be under the hood. Yeah, that's the challenge. And then you because you've got to then look under the hood of each of the companies in there. There's a lot of good looking. [00:39:45][19.8]

Alec Renehan: [00:39:45] There is a lot of that you got to pop out. And it shouldn't be a matter of scaring you off ethical investing if that's what you want to do from a moral perspective or like that's how you want to be an investor. You want to invest ethically. My biggest suggestion is if you don't want to pop all those hoods and look onto them, find an ethical manager that you've heard interviewed, maybe on equity mate, maybe somewhere else, or that you reach out to and you speak to email with that. You comfortable with that? They can you trust them to look under the hood? Yes, because someone's got to be looking [00:40:22][36.2]

Bryce Leske: [00:40:22] under the hood. [00:40:22][0.3]

Alec Renehan: [00:40:23] Someone's otherwise hoods can get very [00:40:24][1.7]

Bryce Leske: [00:40:27] nice one Ren. Well that there's three stocks that might surprise you that are unethical, but at the end of the day, we've made it pretty clear that to some they are, to some they aren't. So the challenge still remains to find an ease at which you can invest ethically. But we'll continue to do our best over, well, the remainder of our time in equity markets to bring more information to help you make ESG investment decisions. [00:40:53][25.9]

Alec Renehan: [00:40:53] But before you might pass an ethical screen that we have ethics. [00:40:57][3.8]

Bryce Leske: [00:40:58] So we do have Bitcoin on the balance sheet. So anyway, before we close out Ren, we do have a lot of calls from the community to get Specky Maggie back on. So we will be having him on very shortly. But another one of the little segments that we've been doing recently is Crypto Corner, just to keep our finger on the pulse of what's going on in the world of crypto, which is brought to you by Bambu, a micro investing app for digital assets as well as gold and silver. So if you want to dip your toe into the water for Bitcoin or Ethereum, gold or silver had to get Bamburgh Io, use the code equity mates and they'll throw ten dollars a bitcoin your way or ten dollars to I guess put in gold silver Ethereum or Bitcoin. So get Bamburgh Io and use the code equity markets. But Ren crypto corner. A quick two minutes on something that has piqued our interest. [00:41:49][50.8]

Alec Renehan: [00:41:50] You would have thought that the fall in Bitcoin had tempered prices love of this asset class, but it has not priced is all about dollar-cost averaging in and you use Bambury still. All these members do it. What do you think the home of Bitcoin is these days, [00:42:08][18.7]

Bryce Leske: [00:42:09] the home of [00:42:10][0.5]

Alec Renehan: [00:42:10] the home of Bitcoin, the spiritual home [00:42:13][3.4]

Bryce Leske: [00:42:15] Tesla? [00:42:15][0.0]

Alec Renehan: [00:42:16] No, it's a place. A place. Oh, Russia, no, Miami. So Miami is the bitcoin Mecca. The mayor there is going all-in on Bitcoin. There was recently the Bitcoin twenty twenty one conference in Miami. A lot of Bitcoin entrepreneurs are moving to Miami. Miami is the place to be if you want to retire, get a tan or talk crypto. And recently, as of a couple of days ago, the largest ever real estate purchase in cryptocurrency was done. Guess where? Miami, Miami at twenty two point five million dollar Miami penthouse was sold just using crypto. [00:43:07][51.1]

Bryce Leske: [00:43:08] Bitcoin specifically [00:43:09][0.5]

Alec Renehan: [00:43:10] doesn't [00:43:10][0.0]

Bryce Leske: [00:43:12] count rockets, [00:43:12][0.3]

Alec Renehan: [00:43:13] maybe dogecoin. [00:43:13][0.3]

Bryce Leske: [00:43:14] Oh, there you go, the what? The highest property around the world. [00:43:17][3.7]

Alec Renehan: [00:43:18] Uh, yeah, yeah. Most expensive property. [00:43:20][2.1]

Bryce Leske: [00:43:21] Most expensive. Yeah. Yeah. Well, there you go. Twenty two and a half million dollars exchanging crypto nice. Well, that's a crypto corner for the week that is. Thank you. Ren brought to you by Ben. Very well. That is the end of the show today. We make this show for you guys. The community here at Equity made. So visit equity, match.com, slash contacts to send us a message. We are on Sociales as well. Hit us up there. We'll do our best to respond. Or Emily, our social media coordinator, will do her best to respond on our behalf if we can't get to all of them. One of the things that we would really appreciate that you could do for us that makes a big difference is to actually write and review our episodes and our podcasts across the board. So had to change if you have it and leave us a review. If it's anything less than five stars, we'd rather you take it up with us personally than leave a comment on iTunes. [00:44:12][51.4]

Alec Renehan: [00:44:13] Look, I'm pretty confident the Vanguard employees are going to be coming in and giving us some bad reviews. So we really need people to come and balance that out. True, true, true. [00:44:21][8.6]

Bryce Leske: [00:44:22] So we appreciate we appreciate all the comments that you do leave us. And, you know, the bigger the audience that we can grow, the better it is for you guys. The bigger this show can become, the [00:44:33][11.0]

Alec Renehan: [00:44:33] better guest with the [00:44:34][0.8]

Bryce Leske: [00:44:34] guests. We can't exactly. So really help us there if you can. But Ren always good to chat stocks specifically three that answer that a surprisingly unethical. We'll get them up on Sociales but we'll chat next week. [00:44:48][14.0]

Alec Renehan: [00:44:48] Don't make promises about. Oh not now so. Yeah yeah yeah. Let's try it next week. Nice. [00:44:56][7.4]

[2542.6]