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If you’re searching for a feel-good stock, see how Facebook, the king of social media, scores on The Motley Fool’s ESG framework.

by Motley Fool analyst Tim Beyers

Investors take Facebook's privacy practices seriously because poor governance can depress performance and impact returns on invested capital (ROIC). Accordingly, in June, Standard & Poor's removed Facebook from its Environmental, Social, and Governance (ESG) index on the occasion of its annual rebalancing. The company also has yet to join the elite members of ESG outperformers on the Dow Jones Sustainability Index. These are important but also subjective measures of Facebook's ESG commitment.

Ultimately, how good (and how bad) Facebook has become at serving both shareholders and the public interest is a matter of perspective and debate. So in that spirit, we decided to look deeper by evaluating the company using The Motley Fool's 10-question framework for ESG attributes. Here's how Facebook stacks up.


A 7 of 10 score raises questions about Facebook's commitment to ESG
Even though Facebook checks the boxes on six questions in The Motley Fool's ESG Compounder Checklist, the two "maybe" answers and two "no" answers on critical questions that relate to management choices and the company's ongoing collisions with regulators and failures on public policy issues make the company not a high scorer on our ESG framework.

The good news? Facebook's ESG standing will improve materially if Zuckerberg and Facebook's other leaders make good on promises to bring to market a fully private Facebook experience that's built on a subscription model, giving customers choices in how they use and experience the world's most feature-rich social media platform. Unfortunately, that day may never come -- and I can't see Facebook as an ESG compounder unless it does.
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