Large- and mega-cap technology companies have long been embracers of environmental, social, and governance (ESG) principles and that includes some companies that are not strictly classified as members of the tech sector.
While ESG has been a long-running focal point for many titans of Silicon Valley and the tech space at large, related shareholder demands are evolving. That much was clear at recent investor meetings among some companies residing in the Invesco ESG Nasdaq 100 ETF (QQMG).
Google parent Alphabet (NASDAQ: GOOG) and Facebook parent Meta Platforms (NASDAQ: META) are the two largest communications services components in the Invesco exchange traded fund with the stocks combining for about 7.40% of the QQMG roster.
As was the case at Amazon (NASDAQ: AMZN), which is another marquee QQMG holding, shareholder resolutions with ESG tilts increased at the Alphabet and Meta annual meetings this year. That could be a sign of things to come in the future, potentially positioning QQMG as a valid avenue for accessing the mega-cap growth/ESG combination.
‘S’ in ESG Increasing Point of Emphasis
One thing that Alphabet and Meta investors are making clear is that they want the companies to prioritize various social issues. Those included gender and racial equity, human rights and online safety.
“Two proposals, one at each company, addressed online safety standards. At Alphabet, 46% of independent shareholders supported a resolution requesting a report on how YouTube’s policies align with online safety regulations. Meanwhile, at Meta, 54% of independent shareholders backed a call for reporting on child safety impacts and reduction of harm to children,” noted Morningstar analyst Lindsey Stewart.
It should be intuitive that companies such as Alphabet and Meta prioritize online safety. Whether they do it because it’s the right thing to do or to avoid regulatory scrutiny, it should be done, but investors clearly want more progress.
Additionally, these companies, in the eyes of some shareholders, have work to do on the governance front. That’s the potential rub with companies with multiple share classes where the founders control the bulk of the voting equity as is the case at Alphabet and Meta. An easy place for these firms to start improving governance practices could be to dial back on lavish compensation practices.
“Similar to Alphabet, shareholders have concerns with the size and structure of the executive pay packets at Meta and are holding the committee members accountable. Also, the company’s decision not to hold a say-on-pay vote this year certainly didn’t help to ease shareholders’ consternation,” concluded Stewart.
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