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“a signal that a particular industry is morally unappealing to a society, so much so that it's days are numbered.“ Or it might be seen as a signal that said in

by usrusr 11y ago

“a signal that a particular industry is morally unappealing to a society, so much so that it's days are numbered.“ Or it might be seen as a signal that said industry might be full of undervalued stock, because a certain fraction of potential buyers opts out without even considering potential revenue and so on, lowering demand in the stock. If enough investors are following this heuristic (instead of actually analyzing the true potential of the companies in question), then high-visibility ethical divestment might even lead to a twisted amorality bubble. For the tobacco example, I think it's the other way around: if (and only if) there is policy against an industry, then divestment will make that policy appear a lot more serious. But this signal would be even stronger when the divestment is done by "pure market rational" actors, that are not influenced by ethics (or that at least give the outside appearance thereof).

notahacker 11y ago
It largely depends on critical mass. One large institutional investor pulling out isn't going to harm a company because a pure profit seeking firm will pick up the slack. But a significant proportion of investors that won't touch a stock is going to have an impact, because even purely rational investors are going to consider the fundamentals of the business affected by the implied lower future liquidity, higher costs of capital and lower ability to retain senior executives with attractive equity offers in future. Even though that impact is unlikely to be large, it's probably large enough for firms keen to avoid being labelled "evil" by activist investors being encouraged to spend a bit more on CSR, tightening up their supply chain and abandoning an unpopular policy or two. It's that secondary effect of encouraging ordinary firms to be more ethically conscious - which GiveWell's article doesn't mention - that's the larger one. A good analogy is democracy. A few people voting for a fringe candidate doesn't harm the mainstream candidates; awareness there's another party complicating the result might even boost the mainstream candidates' votes. As soon as the fringe party gains some sort of critical mass, however, one of the mainstream candidates is likely to start wooing their supporters by adopting one of their more inoffensive policies in some form.

by usrusr 11y ago

notahacker 11y ago

It largely depends on critical mass. One large institutional investor pulling out isn't going to harm a company because a pure profit seeking firm will pick up the slack. But a significant proportion of investors that won't touch a stock is going to have an impact, because even purely rational investors are going to consider the fundamentals of the business affected by the implied lower future liquidity, higher costs of capital and lower ability to retain senior executives with attractive equity offers in future. Even though that impact is unlikely to be large, it's probably large enough for firms keen to avoid being labelled "evil" by activist investors being encouraged to spend a bit more on CSR, tightening up their supply chain and abandoning an unpopular policy or two. It's that secondary effect of encouraging ordinary firms to be more ethically conscious - which GiveWell's article doesn't mention - that's the larger one. A good analogy is democracy. A few people voting for a fringe candidate doesn't harm the mainstream candidates; awareness there's another party complicating the result might even boost the mainstream candidates' votes. As soon as the fringe party gains some sort of critical mass, however, one of the mainstream candidates is likely to start wooing their supporters by adopting one of their more inoffensive policies in some form.