Delta has touted its environmental credentials and year-after-year highlighted its inclusion in the Dow Jones Sustainability North America Index. But outgoing American Airlines CEO Doug Parker took a jab at Delta over this index in remarks to employees following the company’s fourth quarter earnings call on Thursday, a recording of which was reviewed by View From The Wing.
In reviewing highlights of the fourth quarter, Parker told employees that American was added to this index. It’s the only passenger airline included. And that means they “threw out Delta.”
We got added as the only passenger airline in the Dow Jones Sustainability North America Index, which is a mouth full but here’s what it is. There are people who want to invest in funds that they know the stocks in those funds are dedicated to sustainability.
So the Dow Jones goes through and selects companies that they believe in each industry represent the best in terms of sustainability and they added American Airlines to that index – threw out Delta by the way – and put us in.
Just before the pandemic Delta claimed they’d be carbon neutral starting in March 2020. But they were doing this mostly through the magic of carbon offsets, which frequently don’t do much and even increase carbon output.
Months before that Parker threw down against United over the environment in an employee meeting saying they fly older, less fuel-efficient planes than American.
While there may be a future for biofuels, right now they’re impractical and largely a stunt. United has focused on measures like that, but they’ve also invested in direct carbon capture, literally removing carbon that’s been emitted from the environment. That technology isn’t far enough along, but holds promise if enough companies invest and can bring down the cost.
It’s helpful to companies to be included in ESG funds, because that represents more demand for their stock. And it’s easy to invest on the basis of Environmental, Social, and Governance criteria when everything is rising. We’ll see how popular these funds are in a down market considering,
- ESG funds necessarily give up returns for other goals. That’s fine and appropriate as far as it goes, but it’s not how these funds are usually sold. If you’re taking profitable investment opportunities off the table, you’re necessarily going to do worse than you’d otherwise do with an investment portfolio. Non-ESG funds can invest in all of the same vehicles if they’re the most profitable, plus other profitable investments that these funds cannot touch.
- And you’re creating profit opportunities for other investors. By ignoring investment in non-ESG companies you’re leaving those on the table and indeed making them more attractive to other investors by not bidding up their price and competing down their returns.
- Most ESG funds don’t really put their money where their mouth is by not shorting non-ESG companies.
It’s perfectly commendable for an investor relations team to pitch a company to these funds, but American really does seem to lag United on investing in a portfolio of green efforts not to mention on being woke, more generally.
As for Delta, it’s not the first time Parker has taken them on in employee comments.