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No Mercy No Malice

Can ESG Funds Really Fix Climate Change?

Firms would love to have us believe that society’s biggest problems can be fixed as our stock portfolios explode in value

Aspiration’s Aspirations

Aspiration was launched in 2015 by a former Clinton White House aide and Elizabeth Warren protegee. Its initial (and still primary) consumer product was a debit card with some green features. The company claims money deposited in its debit accounts “won’t fund fossil fuel exploration or production”; it plants a tree every time a customer chooses to round up a purchase; and it offers 3% to 5% cash back on purchases from “mission-focused merchants.” More recently, the firm launched another debit card that, in exchange for a monthly fee, offers an interest-bearing account and larger cash-back awards. Both cards are made of recycled plastic.

It Ain’t Easy Being Green

If you use Aspiration you will, according to the firm’s materials, “save the planet.” Again … awesome. Except you won’t. The company guides debit card purchases toward companies with a high “AIM” score (“Aspiration Impact Measurement”), a metric Aspiration appears to have invented and defines nowhere. But a look at the 10 most highly AIM-rated companies (i.e. the “AIM Nice List”) suggests the scoring system leans towards the qualitative. The top 10 in 2018 include Sephora for “promoting fearless beauty,” Target for “normalizing diversity,” Marriott for “adding love to travel,” and my favorite, Delta for “flying cleaner than ever.”

B2B(S)

In 2020, five years after debuting its debit card, Aspiration managed to expand revenue to just $15 million. Yet the company claims that in 2021 its consumer business will triple, to $43 million, and its recently launched corporate consulting business will generate $55 million. And then that corporate business will nearly double in 2022.

When the Ducks Quack

The hype around Aspiration is relentless. The company’s site and investor deck tap into a trifecta: ESG, celebrities, and the very-hot-right-now “as-a-service” moniker.

Yogababble: ESG Edition

When presented with companies promising the world, we apply our Yogababble analysis to their investor documents. In our experience, there’s an inverse correlation between the level of BS in a company’s materials and its stock return post-IPO. Aspiration’s mission statement: “Aspiration is in the Business of Sustainability — Our Mission is to Empower People and Businesses to Do Well and to Do Good.”

EBITDAM

Smearing more vaseline on the lens of the actual business fundamentals, Aspiration turns to creative accounting. Specifically, it leans heavily on a profitability measure called EBITDAM. EBITDA is the familiar “earnings before interest, taxes, depreciation, and amortization.” It’s a measure of how profitable a company’s core operations are before the vagaries of capital structure, tax strategy, and accounting charges. EBITDAM excludes all those things … and then also excludes marketing spend.

SPACtacular

What could greenwashing garner its backers? Potentially a $2.3 billion public market capitalization, should the anticipated SPAC go through.

WeSG

To be clear, Aspiration is not WeWork. The story of We is insanity; Aspiration is mere intoxication. Specifically, a market drunk on true disruptors that have delivered unprecedented returns. Aspiration is only crashing a Bombardier Global Express into a mountain every six months, vs. every three days. Yet, the comparison between the two companies is striking. It’s beginning to smell like teen spirit … if teen spirit is bullshit.