Facebook — a force for evil? It’s one of the great questions of our age, with the Silicon Valley behemoth accused of everything from illegal data-harvesting to facilitating the seemingly inexorable spread of online bullying, hate speech and fake news.
Only last week, a former employee-turned-whistleblower named Frances Haugen testified under oath that ‘astronomical profits’ had persuaded the company to ignore its own research indicating its products ‘harm children, stoke division, and weaken our democracy’.
Leaked documents appeared to support her claim (though the firm insists otherwise).
The social network has also been successfully hijacked by anti-vax propagandists, Russian troll farms and adherents to the pro-Trump conspiracy group QAnon, who in January invaded the U.S. Capitol in a riot that saw five people killed.
Not to mention the perpetrator of the Christchurch terror attack in New Zealand, who used the site to livestream footage of him murdering 51 people in two mosques.
Criticising Facebook is, therefore, very fashionable indeed. Which may explain why the company’s sternest detractors include those irrepressible advocates for trendy causes: the Duke and Duchess of Sussex.
Harry and Meghan have just been unveiled as ‘impact partners’ in an ultra-fashionable Wall Street firm named Ethic, which they modestly claimed will allow them to ‘change the world’ using the power of high finance. However, there are companies in Ethic’s portfolio whose values appear to be dramatically at odds with those of the royal couple
Co-founders of Ethic Johny Mair, left, and Jay Lipman. Ethic has extensive investments in fracking, the highly controversial form of gas extraction from underground shale endlessly vilified by environmentalists. Despite his affection for private jets, Harry has endlessly hectored the public about climate change and fossil fuel emissions
Prince Harry last year called for the ‘heads of major corporations’ to withdraw advertising from it and other social media sites.
Or as he put it in a magazine article, to ‘reconsider your role in funding and supporting online platforms that have contributed to, stoked and created the conditions for a crisis of hate, a crisis of health and a crisis of truth’.
His wife, meanwhile, revealed that she’d quit Facebook’s sister network Instagram, blaming the ‘almost unsurvivable’ toll of internet trolling it permitted and comparing users to drug addicts.
‘I do have concerns for people who have become obsessed with it,’ she declared. ‘It’s an addiction like many others. Something, algorithmically, is creating this obsession and I think that’s very unhealthy for a lot of people.’
Just some of Ethic’s sinful stakes…
All of which makes the royal couple’s latest commercial venture look very strange. They have just been unveiled as ‘impact partners’ in an ultra-fashionable Wall Street firm named Ethic, which they modestly claimed will allow them to ‘change the world’ using the power of high finance.
Their new employer, in which they have an equity stake, targets investors with a social conscience and at least $250,000 (£180,000) to spare).
It then helps them invest their money in shares of companies selected because, in each client’s particular view, they ‘address the defining issues of our time — such as climate, gender equity, health, racial justice, human rights and strengthening democracy’.
So far, so woke. Were it not for a bizarre fact: one of the supposedly squeaky-clean firms in which Ethic has placed a portion the $1.3 billion it has under management just happens to be Facebook.
Regulatory filings reveal that the hipster investment company has bought into the tech giant in a big way, holding around $7 million of its stock in the most recent period for which records are available.
Whether Harry and Meghan (who say some of their personal funds are invested by Ethic) are aware of this is unclear, and there is no evidence they personally hold Facebook stock, since we don’t know what shares they have chosen to buy into.
But it’s far from the only company in the Ethic portfolio whose values appear to be dramatically at odds with those of the royal couple.
Take the company’s extensive investments in fracking, the highly controversial form of gas extraction from underground shale endlessly vilified by environmentalists.
Despite his affection for private jets, Harry has endlessly hectored the public about climate change and fossil fuel emissions.
Yet among 16 energy companies in which Ethic holds stock is Helmerich & Payne. According to the Wall Street Journal, H&P is ‘the dominant supplier of high-performance drilling rigs used in shale gas fields’ and last year reported revenues of $1.8 billion.
Ethic has $1.1 million invested with the firm. Another $1 million is invested in Temaris, the world’s largest supplier of steel pipes to the fossil fuel industry.
There’s also a $1.6 million holding in the Hess Corporation, a major U.S. oil and gas company with significant fracking operations in North Dakota.
The investment firm has also held stakes in EOG Resources, previously part of Enron (the large oil firm which collapsed amid an accounting scandal) and Halliburton, the world’s biggest fracking services provider.
Doubtless these fossil fuel holdings have been highly profitable. But are they aligned with Harry and Meghan’s values? Absolutely not. And it is not the only sector in Ethic’s share portfolio that might concern its new ‘impact partners’.
The royal couple, whose role appears to involve acting as a form of brand ambassador — so they are effectively profiting from little more than their celebrity status for the first time — have recently been highly critical of large pharmaceutical companies for failing to surrender patents on their Covid vaccines.
Ethic was founded in 2015 by Brit Jay Lipman (left), 33, a vegan former rugby player who attended £37,000-a-year Epsom College, followed by Edinburgh University. His co-founders are Johny Mair (right), a bearded Australian who has campaigned for gay marriage, and Doug Scott (centre), a self-described son of ‘two forward-thinking social and environmental activists’ from Melbourne who says he quit a lucrative banking career because — perhaps ironically — dealing with oil and gas investments ‘just didn’t sit well with my value set’
Just last month, Harry made a speech complaining: ‘Many countries are ready to produce vaccines back home yet they aren’t allowed to because ultra-wealthy pharmaceutical companies are not sharing the recipes to make them.’
Awkwardly, every single one of those listed companies that has developed Covid vaccines count Ethic as investors.
The company has $2.5 million in Johnson & Johnson, $2.2 million in Novartis, $1.6 million in both Sanofi and AstraZeneca, $760,000 in GlaxoSmithKline and $747,000 in Pfizer.
The Sussexes, at least indirectly, profit from every holding as they have their own stake in Ethic, which charges an annual fee of around half a per cent on stocks it holds for clients. Some might call this the very definition of hypocrisy, though the firm (and, we must assume, the couple) argue otherwise.
To understand why we must first examine the business model of Ethic, founded in 2015 by Brit Jay Lipman, 33, a vegan former rugby player who attended £37,000-a-year Epsom College, followed by Edinburgh University.
His co-founders are Johny Mair, a bearded Australian who has campaigned for gay marriage, and Doug Scott, a self-described son of ‘two forward-thinking social and environmental activists’ from Melbourne who says he quit a lucrative banking career because — perhaps ironically — dealing with oil and gas investments ‘just didn’t sit well with my value set’.
Their big idea was to cash in on the growing trend in woke capitalism by starting a firm that will help individual clients create customised share portfolios that reflect their unique personal values.
New customers are therefore encouraged to fill out a ‘sustainability mission builder’, choosing priorities from a list that includes racial justice, climate change, deforestation and women’s rights.
The whole thing is run from an ultra-trendy website resembling something an edgy fashion brand (rather than a Wall Street investment house) might produce.
There are photos of its co-founders in tie-dye T-shirts, and quirky black-and-white GIFs in which other employees celebrate their ‘diverse backgrounds and global mindset’.
There are also edgily lit videos in which Lipman reveals staff begin each day with ‘gratitude sessions’ where staff thank each other, and declares: ‘We love hippies . . . we probably are hippies, in a way!’
To a cynic, this might sometimes resemble an elaborate spoof (no fewer than 14 of 25 male staff members have a hipster beard).
But there’s clearly a market for this stuff: just two years ago, Ethic had just $180 million under management and 25 employees. Now it boasts $1.3 billion and roughly 40 employees.
Industry insiders remain divided over its long-term prospects, saying the market for so-called ‘ethical’ investing is already crowded, and the firm has yet to make a profit — if it charges a fee of 0.5 per cent on each investment, annual revenues would be just $6.5 million, from which it has to pay salaries and finance its trendy office in Manhattan.
Yet the company was able to raise $29 million in funding in March, in a venture that valued the company at $139 million. In addition to Harry and Meghan, Hollywood star turned tech investor Ashton Kutcher chipped in.
Yet while it may talk the talk on woke investing, the important question is whether Ethic also walks the walk. So it’s interesting to note that despite trendy claims on its website, Ethic’s business model means it will inevitably hold shares for some clients others might find deeply unethical.
‘We allow our clients to choose the environmental, social and governance issues that are most important to them, then help them create custom portfolios based on their values and preferences — not ours,’ explains a spokesman.
This is in some ways sensible: one person’s ethical can, of course, be another’s deeply unethical.
But given the company’s apparent pursuit of the moral high ground, it can also look very awkward indeed.
Take, for example, an article Mair, Ethic’s co-founder, wrote in Wealth Management magazine two years back outlining the sort of trends his firm hoped to prosper from.
‘As society has become more global and more connected, consumers and investors alike have begun calling out businesses on moral grounds,’ he wrote.
‘The joys of wearing Nike faded as reports of child and sweatshop labour emerged. Uber lost its lustre amid allegations of sexual harassment and discrimination, and when the CEO was shown disrespecting drivers #DeleteFacebook, a campaign against the social media company, caught like wildfire as users became aware of poor data-privacy practices.
‘Cultural criticisms have begun to have real financial consequences, and investors care about a business’ environmental, social and governance practices.’
Fast forward two years, however, and I can reveal Ethic holds not just $7 million in Facebook stock, but $5.5 million in Nike and $1.3 million in Uber.
Ethic also appears to take a healthy interest in minimising tax liabilities.
Incorporated in the state of Delaware, a domestic tax haven described by the Boston Globe as ‘the premiere secrecy jurisdiction in the country’, part of its appeal to wealthy clients, according to one quoted in a newspaper profile this week, is software that helps them take advantage of opportunities for ‘tax-loss harvesting’.
This technique allows people to legally sell loss-making investments to limit tax liabilities on other gains.
As it happens, elaborate tax minimisation strategies are also a feature of companies that constitute the five largest holdings in Ethic’s portfolio, which are valued at around $150 million and account for 18 per cent of all the investments the firm has under management.
They are Amazon (which paid no corporation tax in Europe last year on record sales of £38 billion); Microsoft (the Irish arm of which made a profit of $315billion last year but paid no corporate tax as it is ‘resident’ for tax purposes in Bermuda); Apple (which paid income tax on only 17 per cent of its profits in the past decade); Google (which funnels profits to Bermuda); and Nvidia, the world’s largest chipmaker, which reported an effective tax rate of less than 2 per cent last year, in part by booking profits in the British Virgin Islands, Israel and Hong Kong.
All perfectly legal. But ethical? It depends on your point of view.
Other Ethic stock picks that may sit uneasily with its royal ‘impact partners’ include U.S. retailer Home Depot — the firm’s ninth biggest holding, worth $8.2 million — which was at the centre of a ‘woke’ consumer boycott in July 2019 when the firm’s founder Bernie Marcus came out in support of Trump and started funding him.
Plus $539,000 invested in Fox corporation, the parent company of Rupert Murdoch’s pro-Trump TV network Fox News.
Then there are junk food purveyors Pepsi and McDonald’s, the prominent ‘sin stock’ Diageo, which profits from the sale of alcohol, and Mondelez, a vast food company recently named as a defendant in a child-slavery lawsuit filed in Washington DC by a lobby group called International Rights Advocates, which has alleged that they ‘hire children from Mali to work without pay on cocoa plantations in the Ivory Coast’ (it disputes liability).
The firm also has holdings of $216,000 in Raytheon, an arms firm that makes deadly Paveway laser-guided missiles of the sort dropped on Iraq in the Gulf War, plus money in car firms Honda and Toyota, and gas-guzzling airline Alaska.
As principled supporters of the Black Lives Matter movement, Harry and Meghan will also be intrigued to discover their new employer also holds shares in the paint company Sherwin-Williams, currently being targeted by civil rights groups who complain, possibly unfairly, it’s not employing enough black contractors.
Or tractor maker John Deere, subject of a boycott by America’s National Black Farmers Association, accused of subjecting people of colour to ‘years of discrimination and inequitable treatment’. The firm denies racism.
Finally, on a more international note, Ethic is also invested in chemical giant DowDuPont, which owns Union Carbide, the chemical firm that presided over the Bhopal disaster in 1984, where a cloud of toxic gases leaked from a pesticide factory in the Indian city, killing 8,000 at the time and the same number in the ensuing years.
Admittedly, the tragedy pre-dates DowDuPont’s ownership, and the firm was of course not responsible. But from a PR perspective it remains sticky.
There are, we can assume, many other potentially controversial firms lurking in Ethic’s portfolio.
Do their values sit comfortably with those of a couple who, when announcing their new job this week, declared ‘when we invest in each other we change the world’?
The jury is certainly out, because people who choose to preach about changing the world are generally expected to also practise what they preach.