Ubben, who retired from the $16 billion activist firm ValueAct Capital Management LP in June to start Inclusive Capital Partners LP, an ESG-focused fund manager, said stock prices of many large companies had yet to fully reflect the global problems to which they contributed, such as McDonald's Corp on obesity and Coca-Cola Co on plastic waste, but that was beginning to change.
"The externalities of the core business are now starting to be reflected in the stock price," he said in an interview at Reuters Events' ESG Investment North America conference https://reutersevents.com/events/esg-investment-north-america.
In an emailed statement, a spokeswoman for Coca-Cola said that the company was "committed to being a responsible business" and has invested globally to increase bottle and can recovery while already using at least 50% recycled content in all packaging. Representatives for McDonald's did not respond to an email seeking comment.
Ubben also decried what he called the "productizing" of ESG investing through exchange-traded funds, products that invest in a basket or index of stocks known as ETFs, saying they allowed investors to feel good but that their money was not being used to cause major change.
ESG exchange-traded funds managed by BlackRock Inc and others own too many widely held stocks that satisfy "checklist" criteria but whose broader businesses could be problematic, Ubben said.
"They own the same 10 stocks as the S&P," Ubben said, citing Google and Facebook Inc as examples. "It allows people to run away from the problem and think they are doing something."
A spokesman for BlackRock declined to comment. The firm has seen some $25 billion flow into its ESG ETFs this year, double the amount in 2019, according to its earnings report on Tuesday.
CEO Larry Fink said in a January letter to company chief executives that BlackRock was expanding its suite of ESG products because it wanted to "make sustainable investing more accessible to all investors."
Ubben said he was supportive of Fink's broader efforts to increase its engagement with companies on ESG issues.
Ubben said Inclusive, which managed $1.3 billion as of July and is backed by Affiliated Managers Group, would look for investments in growth companies with strong potential for ESG impact, or those that traded lower after belatedly accounting for external ESG impact and were committed to change.
Inclusive's portfolio so far, Ubben said, includes wood pellet maker Enviva Partners LP; renewable diesel company Darling Ingredients Inc; indoor farmer AppHarvest; educational technology business Strategic Education; and electric truck maker Nikola Corp.
Nikola, for which Ubben is a director, has recently come under pressure to prove its nascent hydrogen-powered technology.
"When the price will presume the status quo, we come in and change the strategy," he said. "That's the idiosyncratic return that we seek."
(Reporting by Lawrence Delevingne; Editing by Paritosh Bansal, Cynthia Osterman and Sonya Hepinstall)
By Lawrence Delevingne