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Last week, BlackRock chairman Larry Fink’s annual letter to CEOs was released, and it contains ample thoughts on stakeholder capitalism — the notion that companies and capitalism itself should do right by more folks than simply credit and equity investors and high-ranking executives.
Stakeholder capitalism intersects with the “S” and “G” in the environmental, social, and governance (ESG) equation, and while the number of ESG exchange traded funds on the market seemingly grows by the week, the Goldman Sachs JUST U.S. Large Cap Equity ETF (JUST) stands out as a fund that truly puts stakeholder capitalism into investable form.
JUST, which follows the the JUST U.S. Large Cap Diversified Index, turns four years old in June, but it’s not “old guard” in the ESG ETF space. In fact, JUST represents a fresh approach to sustainability in investing because its approach is deeper than those of many traditional ESG funds. The ETF’s index scores “Russell 1000 Index companies across a variety of issues, including worker treatment, customer concerns and environmental impacts,” according to Goldman Sachs.
While stakeholder capitalism is just now becoming a bigger priority at the corporate level, CEOs need to realize that there are long-term benefits on this front.
“Putting your company’s purpose at the foundation of your relationships with your stakeholders is critical to long-term success,” says Fink. “Employees need to understand and connect with your purpose; and when they do, they can be your staunchest advocates. Customers want to see and hear what you stand for as they increasingly look to do business with companies that share their values. And shareholders need to understand the guiding principle driving your vision and mission. They will be more likely to support you in difficult moments if they have a clear understanding of your strategy and what is behind it.”
Another stakeholder capitalism issue that’s come to light through the coronavirus pandemic is how companies treat employees, which are their most important resource. As Fink notes, companies that treat employees well — and plenty reside in JUST — are rewarded for those efforts.
“Companies that deliver are reaping the rewards. Our research shows that companies who forged strong bonds with their employees have seen lower levels of turnover and higher returns through the pandemic,” says the BlackRock boss.
Due to its broad-based domestic equity exposure, JUST can be an alternative to traditional S&P 500 and Russell 1000 Index funds. In fact, JUST recently outperformed the Russell 1000.
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