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Traditional banks are not taking the fintech threat lightly and are leveraging their massive scale in protecting market share. The top U.S banks have a reputation of being slow moving and unwilling to modernize their tech infrastructure to deliver a high-quality product to the end client. We believe this is starting to change as the banks realize if they do not innovate and become leaner, they will get beat by startups who focus on simplicity, flexibility, and lower cost for the consumer. JPM is by far the biggest mover out of the largest banks in reworking their tech infrastructure and leveraging their size to deliver competitive products that will potentially kill unprofitable subscale startups before they can reach scale. While these investments will hurt short-term performance these investments could pave the way to retaining their significant market share going forward.
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ESG investing is a complicated form of investing simply due to how subjective ESG rankings are and how you weigh certain criteria. In theory, Tesla should be in the top of ESG indexes and Exxon on the bottom as gas and oil drilling will leave lasting negative impact on the environment that could subject future generations to significant health and environmental issues. Proponents for Exxon could argue poor working conditions for Tesla employees and a toxic culture prevent Tesla from being an ESG leader. But how do you weigh the struggle of the Tesla workforce to the long-lasting negative impact of oil drilling on the entirety of society? In our opinion, ESG scoring methodologies still have a long road before providing quantifiable metrics in helping determine the quality of a business and its competitive moat/advantages.