As far as closing the door after the horse as bolted goes, suspending the social media accounts of the 45th President on 8 January based on two specific tweets is just about the perfect example.
After months of baseless complaints about the legality of election loss, a steady stream of delusion and deceit broadcast unfiltered to 60 million followers, President Donald Trump reiterated every false assertion to a crowd of supporters a few miles from the location of the final certification of his loss. Then followed tragic and truly shocking scenes at the US Capitol that wouldn’t be out of place in a badly written political drama.
The US isn’t supposed to be the kind of place where angry mobs interrupt the democratic process. For many, the incitement to such action marked their final departure from tacit or explicit support for Trump.
But responsible investors need to face up to the role big tech played in facilitating this scenario to happen. If we are serious about addressing the ‘S’ in ESG with greater rigour, we desperately need to wrestle with this example.
Big tech companies are playing an increasingly dominant role in all our lives, and especially in our democracy – we cannot ignore them. The final days of the Trump administration lay bare just how seemingly innocuous and dull policies such as Twitter’s stance on world leaders (World Leaders on Twitter: principles & approach – allowing public figures with more than 100,000 followers to say things any other user would be banned for) can have real world consequences.
The early days of the internet were relatively innocent. I’m sadly old enough to remember having to book time on our dial up internet to log on to a chat room to talk about my favourite Britpop band. But the world of the internet changed when, under pressure from investors, Google opted to adopt an ad-based business model.
Targeted adverts placed according to your search terms seemed harmless enough. But with the advent of increasingly sophisticated AI and machine learning, coupled with the smartphone revolution, technology companies became aware they could also shape your preferences, not just respond to them. The nascent social media companies took notice, and the world of public and private content creation was born.
Whatever their stated business model, social media is after two things: your attention and your data. Every second spent ‘doomscrolling’ through a Twitter feed is potentially monetised.
Twitter would say its purpose is to be “a place where people can participate in public conversation and get informed about the world around them”. However, advertising sales amounted to 86% of its revenues, equivalent to $804m in November 2020. In that context, controversial figures such as President Trump are worth keeping around.
Risk to democracy
Mainstream investors might shrug their shoulders as they watch the tech stocks soar. Where’s the risk, then? Social media enables both collective joy at a grandchild’s birth, for example, does that mean right-wing supremacists plotting an armed insurrection is but an unfortunate consequence?
Governments should police what they can police and it’s not any concern of the company or investor? Some platforms would use a version of this argument, insisting they aren’t publishers of material, but just that – platforms – which enable all kinds of content to be published.
The distinction isn’t theoretical – in the US at least, these companies enjoy protections under Section 230 of the Communications Decency Act, which gives online platforms immunity for their users’ defamatory, fraudulent, or otherwise unlawful content.
Well, the point is macro and systemic not micro and portfolio level. Looking at the events of the Capitol, we see more clearly than ever it has reached a tipping point. The most dangerous anti-democratic, anti-vaccine, climate change denying sceptics can set up shop online and undermine truth in our democracies. And that has real world consequences – for our lives, our economies and our portfolios.
ESG investing has taken off because it allows concern for issues to be dealt with inside the economic status quo. We shouldn’t be blasé about that state of affairs. Responsible capitalism rests on a foundation of good governance at national and supranational level.
Looking around the world, the most advanced companies from an ESG point of view find themselves located within functional democracies. The reasons for this are long and complex, but if we define responsible capitalism as economic activity with a clear purpose, transparency over impacts and outcomes and functional accountability, we see quickly that democracy more broadly plays a vital role in enabling responsible capitalism.
At the start of my career, we focused on ethical exclusions as the basis for portfolios helping to do well by doing good. One such exclusion centred on traditional press providers that promoted climate change denial in an unbalanced way. It was a fascinating project – one with few clear answers, but for a few particular clients, they felt the impact of those providers undermined their clean tech investments and hence sought to exclude them from their portfolios. Fast forward 20 years and ESG investors are exposed to the very same risks.
It’s time to take the ‘S’ in ESG more seriously than ever.