”The Magnificent 7” – why most of them didn’t make it into the Ruth Core Global Equity Fund

In 2023, the Magnificent Seven stocks—comprising Apple, Microsoft, Alphabet, Amazon, Nvidia, Meta Platforms, and Tesla—demonstrated their value by achieving significant gains. While the Magnificent 7 can be found in many ESG indices and some assessments may perceive the Magnificent 7 as sustainable, a deeper investigation reveals that when considering the three dimensions of Climate Transition, UN SDGs, and ESG, these companies often only excel in one or two dimensions, if any, while performing poorly in others.

The analysis of the so-called "Magnificent 7" stocks is built upon the comprehensive framework of the Sustainability Cube?, which breaks down the overall Sustainability Cube? score into three key dimensions: Climate Transition, ESG Industry Leaders, and UN Sustainable Development Goal Alignment. This framework provides a nuanced understanding of the companies' performance across various sustainability metrics.

One glaring issue contributing to their underperformance is the absence of "alignment" within their corporate practices. Their lack of "alignment" is often driven by controversies, which dilute the credibility and relevance of otherwise existing policies and initiatives. These controversies often revolve around labor management and practices, human capital development, and product safety and quality, all of which directly impact several SDGs and the 'S' in ESG. Additionally, governance-related controversies, such as anticompetitive practices, are frequently observed among these companies.

However, the Magnificent 7 do maintain relatively strong SDG product and revenue alignment, suggesting a disconnect between their corporate practices and their impact on sustainable development goals. Mixed sentiment scores among investors further complicate the picture. While there is recognition of their positive contributions, concerns persist regarding operational alignment.

Finally, it is pertinent to highlight some of the key distinctions among the seven companies. Notably, NVIDIA stands out as the sole company included in the Ruth Core Global Equity Fund. NVIDIA distinguishes itself by maintaining a record free of labor practice issues, product safety concerns, and controversies in general. In contrast, while Tesla excels in the Climate Transition dimension and its products align well with various climate-related UN Sustainable Development Goals (SDGs), the company faces significant challenges and controversies regarding labor management and product safety, and for that reason Tesla did not enter the Ruth Core Global Equity Fund.

In summary, the "Magnificent 7" stocks may shine brightly in terms of market capitalization and influence, but their poor SDG and ESG scores, coupled with controversies, underscore the need for a more holistic approach to corporate responsibility and sustainable development.