This summer, Amazon lost an A.
Morgan Stanley Capital International, or MSCI, a New York-based investment research firm, dropped Amazon from a grade A rating to a BBB in August.
MSCI uses that scale — which runs from AAA to CCC — to tell investors how well a company is doing on several non-financial factors that may matter to shareholders, like carbon emissions, executive pay and diversity.
The scale is part of the world of ESG — a type of investing that is billed as a way for shareholders to put their dollars toward companies that align with their values. E stands for environmental, S for social, G for governance. Workforce diversity and equity, customer satisfaction and labor relations are captured in the social catchall, while governance references board composition, executive compensation and political donations.
MSCI is one of dozens of firms that rank companies on ESG factors, hoping to help other firms make decisions about which companies to include in stock portfolios that are organized around ESG metrics. Those firms market the portfolios to investors as a way to use stock holdings to further their personal values.
Amazon is included in some of the largest ESG funds, like BlackRock and Vanguard. It's not listed in Fidelity's climate action fund but it does have a spot in the firm's women's leadership fund. Amazon's 11-person board of directors includes five women.
But in August, the tech and e-commerce giant lost points in two ESG indicators: MSCI downgraded the company and the Science Based Targets initiative, a United Nations-backed organization that acts as a watchdog of corporate climate goals, removed Amazon from its list of companies that have committed to net zero emissions targets.
As Amazon faces increased pressure to reduce its impact on the climate and improve working conditions in its warehouses, two issues that fall squarely into E and S, the change raised the question: Could Amazon lose its status in the world of ESG investing?
The short answer: Probably not.
"I don't think it makes a difference," said Ann Terlaak, a business professor at the University of Wisconsin-Madison. Tensie Whelan, a professor from New York University, said the "average fund" would likely continue investing in the company.
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