APR 09 2019
All Posts
APR 09 2019
All Posts

Facebook and what responsible investors can do

Posted by: Aaron Drew, Economist and Rutherford Rede Investment Committee Member in finance

The notion that Facebook and other social media providers (e.g. YouTube which is owned by Google) need not take responsibility for what is broadcast on their platforms was shattered following the Christchurch shootings.  There is a growing chorus in New Zealand and offshore to bring them under that same standards that other broadcast mediums (radio and television) must comply with to maintain their licence to operate. 

One of the strongest admonishments has come from New Zealand’s Privacy Commissioner, John Edwards, who said (via tweeting):

"Facebook cannot be trusted. They are morally bankrupt pathological liars who enable genocide (Myanmar), facilitate foreign undermining of democratic institutions, allow the live streaming of suicides, rapes, and murders, continue to host and publish the mosque attack video, allow advertisers to target 'Jew haters' and other hateful market segments, and refuse to accept any responsibility for any content or harm.”

New Zealand’s institutional investor community, who invest in Facebook and co., has taken these concerns extremely seriously. Large investors like the NZ Superfund and ACC, both alone and in concert with global institutional investors, have the clout to influence corporate behaviour through engagement with Boards and executives, and via their shareholder voting rights. Engagement by socially responsible investors is widely seen as much more effective than divesting from holding a company’s shares. Divestment may cause short-term pain for a company to the extent it impacts their share price, but once that’s over the investor has no ability to influence positive change. For this reason, divestment is usually only taken as an option once engagement has proven to be ineffective.

So where do things stand now?

The NZ Superfund and other Crown Financial Institutions have formally asked Facebook, Google and Twitter for detail on how they monitor and censor “objectional and extremist content”, among other things, and have also sought support for this inquiry from other large Sovereign investors (e.g. the very large Sovereign funds in Europe and the Middle-East). They are also considering whether such companies have breached New Zealand law or regulations through their inability to monitor and effectively remove any extremist content. 

Following this process, we can expect one of two outcomes. Either the social media platforms will make visible and concrete measures to increase standards, or divestment will surely follow. If the latter option is taken, we can expect international fund managers to follow suit, enabling end investors in New Zealand to also easily exclude these companies from their holdings. 

Time will tell.

Key facts from around the globe

Events
  • The Trump Administration touted that a “great trade deal” between the US and China is imminent. While this remains to be seen, market fears of a trade war have clearly been removed.
  • In the face of slowing global growth, Chinese authorities announced measures to reduce taxes, ease credit conditions, and increase government spending.
  • The New Zealand government and large investors like the NZ Superfund piled the pressure on Facebook to take more responsibility for what is broadcast on its platform following the Christchurch mosque shootings tragedy.
Economics
  • Global growth continues to slow, particularly in Europe where trade with China has declined and dented auto sales and manufacturing activity. 
  • The Reserve Bank of New Zealand responded to the slowing economic environment by announcing that their next move in short-term interest rates could be a cut.
  • Despite the slowing global environment, New Zealand’s GDP growth for the December quarter came in at 0.6% or 2.8% for the year. This was a stronger outcome than many had feared.
Markets
  • Developed equity markets increased around 1.5% in March, bringing the year-to-date return to around 12.5%. This has reversed most of the brutal sell off seen in December 2018. 
  • Emerging market equites also rallied, increasing around 1% in March and 10% for the quarter. Within emerging markets, the Chinese market has been the stellar performer, up around 25% so far this year as trade war fears have diminished and Chinese stimulus has borne fruit.
  • New Zealand’s capital markets broke several records – the NZ50 reached record highs, ten-year bond yields reached record lows (1.75%), and the New Zealand Stock Exchange oversaw a record issuance of bonds on its exchange as borrowers took advantage of lower financing costs.

Key figures


The information contained in this report is provided for general purposes only and does not constitute financial, legal, or tax advice, or consider any person's particular financial situation or goals. MyFiduciary Ltd. does not assume any responsibility for giving legal or other professional advice and disclaims any liability arising from the use of the information. If you require legal or other expert advice you should seek assistance from a professional adviser.

Tags: Monthly Economic Roundup, The World In Ten Minutes,

The notion that Facebook and other social media providers (e.g. YouTube which is owned by Google) need not take responsibility for what is broadcast on their platforms was shattered following the Christchurch shootings.  There is a growing chorus in New Zealand and offshore to bring them under that same standards that other broadcast mediums (radio and television) must comply with to maintain their licence to operate. 

One of the strongest admonishments has come from New Zealand’s Privacy Commissioner, John Edwards, who said (via tweeting):

"Facebook cannot be trusted. They are morally bankrupt pathological liars who enable genocide (Myanmar), facilitate foreign undermining of democratic institutions, allow the live streaming of suicides, rapes, and murders, continue to host and publish the mosque attack video, allow advertisers to target 'Jew haters' and other hateful market segments, and refuse to accept any responsibility for any content or harm.”

New Zealand’s institutional investor community, who invest in Facebook and co., has taken these concerns extremely seriously. Large investors like the NZ Superfund and ACC, both alone and in concert with global institutional investors, have the clout to influence corporate behaviour through engagement with Boards and executives, and via their shareholder voting rights. Engagement by socially responsible investors is widely seen as much more effective than divesting from holding a company’s shares. Divestment may cause short-term pain for a company to the extent it impacts their share price, but once that’s over the investor has no ability to influence positive change. For this reason, divestment is usually only taken as an option once engagement has proven to be ineffective.

So where do things stand now?

The NZ Superfund and other Crown Financial Institutions have formally asked Facebook, Google and Twitter for detail on how they monitor and censor “objectional and extremist content”, among other things, and have also sought support for this inquiry from other large Sovereign investors (e.g. the very large Sovereign funds in Europe and the Middle-East). They are also considering whether such companies have breached New Zealand law or regulations through their inability to monitor and effectively remove any extremist content. 

Following this process, we can expect one of two outcomes. Either the social media platforms will make visible and concrete measures to increase standards, or divestment will surely follow. If the latter option is taken, we can expect international fund managers to follow suit, enabling end investors in New Zealand to also easily exclude these companies from their holdings. 

Time will tell.

Key facts from around the globe

Events
  • The Trump Administration touted that a “great trade deal” between the US and China is imminent. While this remains to be seen, market fears of a trade war have clearly been removed.
  • In the face of slowing global growth, Chinese authorities announced measures to reduce taxes, ease credit conditions, and increase government spending.
  • The New Zealand government and large investors like the NZ Superfund piled the pressure on Facebook to take more responsibility for what is broadcast on its platform following the Christchurch mosque shootings tragedy.
Economics
  • Global growth continues to slow, particularly in Europe where trade with China has declined and dented auto sales and manufacturing activity. 
  • The Reserve Bank of New Zealand responded to the slowing economic environment by announcing that their next move in short-term interest rates could be a cut.
  • Despite the slowing global environment, New Zealand’s GDP growth for the December quarter came in at 0.6% or 2.8% for the year. This was a stronger outcome than many had feared.
Markets
  • Developed equity markets increased around 1.5% in March, bringing the year-to-date return to around 12.5%. This has reversed most of the brutal sell off seen in December 2018. 
  • Emerging market equites also rallied, increasing around 1% in March and 10% for the quarter. Within emerging markets, the Chinese market has been the stellar performer, up around 25% so far this year as trade war fears have diminished and Chinese stimulus has borne fruit.
  • New Zealand’s capital markets broke several records – the NZ50 reached record highs, ten-year bond yields reached record lows (1.75%), and the New Zealand Stock Exchange oversaw a record issuance of bonds on its exchange as borrowers took advantage of lower financing costs.

Key figures


The information contained in this report is provided for general purposes only and does not constitute financial, legal, or tax advice, or consider any person's particular financial situation or goals. MyFiduciary Ltd. does not assume any responsibility for giving legal or other professional advice and disclaims any liability arising from the use of the information. If you require legal or other expert advice you should seek assistance from a professional adviser.

Tags: Monthly Economic Roundup, The World In Ten Minutes,

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