Pinterest’s Pivot Toward ESG Is Intriguing but Not Enough
- Pinterest’s (PINS) pivot to environmentalism initially appears intriguing.
- However, the narrative of ESG investing is proving to become complicated.
- Prospective buyers may want to wait for clearer signals.
Social network Pinterest (NYSE:PINS), while an intriguing name on paper, has been struggling in the market mightily this year. So why not pivot as an environmental, social, governance (ESG) play? That’s the intriguing concept that InvestorPlace contributor Will Ashworth reported on recently. And for some folks, it might seem like the upside catalyst that PINS stock needs. But personally, I’m a bit skeptical.
Recently, Pinterest announced its official climate misinformation policy, claiming that it’s the only major digital platform to have policies regarding propaganda or spin that impacts the discussion about climate change. Moreover, Ashworth states that “this move by Pinterest is the right one. It could be the tonic it needs to turn around its share price.”
Not to be flip but with a year-to-date (YTD) loss through the March 6 session of nearly 33%, PINS stock has to start generating positive momentum first. Otherwise, embattled stakeholders might abandon ship for higher-probability opportunities.
Still, Ashworth makes a solid case:
Social media platforms have become the breeding ground of misinformation in recent years. With 431 million active users worldwide, Pinterest is wise to continue differentiating itself from its major peers. Being honest about climate change should go a long way in gaining the trust of its current and future users.
But is this battle worth fighting for if you’re Pinterest? I’m not entirely sure.
| PINS | $23.57 |
PINS Stock Seems an Attractive Feel-Good Idea
Unless you’re a despotic leader in a far-flung country I won’t name, we all live in a world of compromises. Generally, we grew up understanding that we can’t have our cake and eat it too. For instance, our parents or guardians demanded us we eat our greens. It was good for us but the compromise was that they weren’t particularly palatable.
Intuitively, then, we have reservations about ESG investing. On one hand, it’s a wonderful feeling to know that your investment dollars are going toward a great cause. Therefore, on paper, PINS stock may appear compelling. By acquiring shares, you essentially have a twofer. It’s possible you can amass significant profitability while at the same time empowering Pinterest to crack down on climate-related fake news.
We only have one planet; what’s not to love about this initiative?
Further, thinktanks like the Milken Institute have contributed research demonstrating that when it comes to ESG investments. And, as it turns out, people really can have their cake and eat it too. Using inflow data into sustainability-oriented mutual funds and exchange-traded funds, it became “clear that investors are increasingly putting their money where their hearts are.”
So, an easy win for PINS stock, yeah? Not quite.
The Reality Starts to Set In
Several months ago, Vox contributor Emily Stewart brought up another perspective — an inconvenient truth if you will — about ESG-oriented investments. To summarize her research, ESG companies may start off with good intentions but eventually, the temptation for cynicism sets in. Before long, they or other unrelated observers may exploit ESG sensibilities for profit.
According to Tariq Fancy, the former chief investment officer for sustainable investing at BlackRock (NYSE:BLK): “What you get is an industry that knows if they put ‘ESG’ or ‘green’ on something, they can make a lot more money out of it.” The end result is that “you have a public that says, ‘If it says ESG on it, I should probably buy this.’”
To be clear, I’m not suggesting that PINS stock is in the business of benefiting from an exploitation of the underlying climate initiative. What I am saying is that ESG investments are far more complicated, involving myriad layers that might not see investor and consumer dollars being directed in the most appropriate manner to achieve said ESG goals.
Further, it’s also not clear that even legitimate ESG initiatives will be beneficial for PINS stock. In a recent CNBC article, it pointed out that green investments are underperforming this year, which should raise questions about the sustainability of “do-goodery” on Wall Street.
Not a Whataboutism but Reality
To make another point crystal clear, I’m not here presenting a whataboutism. As in, I’m not saying that just because problems with ESG investments exist that Pinterest’s climate initiatives should somehow be impugned. If combating climate propaganda is especially meaningful to you, then perhaps PINS stock is the twofer you’ve been looking for.
However, if you were searching strictly for an investment opportunity divorced from any political or ideological undertones, then PINS stock via its climate misinformation policy might not be enough. A growing body of evidence suggests that banking on ESG alone — as opposed to depending on a combination of viable business practices and a sustainability ethos — might not be an immediate recipe for success.
Frankly, you must ask yourself this question: with PINS stock down 33% YTD, is ESG the catalyst that it’s been missing all this time?
It could be. But I’m skeptical.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
