I lean towards Cullen Roche's take: > 1) ESG investing is more active investing that will increase the probability of lower future returns. […] I won’t regurgi

I lean towards Cullen Roche's take: > 1) ESG investing is more active investing that will increase the probability of lower future returns. […] I won’t regurgitate Larry Swedroe and Cliff Asness’s excellent work on this subject so I’ll just a [leave link here] and [here in case] you want to see the financial cost of this investing strategy. The short version is, these strategies underperform in theory and in reality, as expected. > 2) The secondary market is a bad place to enact change. The intelligent defense of ESG is “by reducing the demand for a stock we can increase its cost of capital and impact its operating performance.” This is true to some degree, but I think this is dramatically overstated. For instance, the firms in the S&P 500 are all large established firms that have more than enough capital to finance their operations. They aren’t using the secondary equity markets to fund their operations. In fact, most firms have so much capital that they’ve been net buyers of stock in the last 50 years. So, this puts the cart before the horse. The better way to think of public companies is to think of them like horse betting. We can bet on the horses, but secondary market purchases are just private exchanges, not cash issuance to firms. As a result, betting on the horses doesn’t change the outcome of the race. Similarly, our secondary market purchases and sales have a far smaller impact on the firm’s operations than we might think.¹ > 3) ESG investing puts more money in the hands of bad actors. […] This means that someone else is earning a higher return and potentially investing more of that money into the causes you don’t believe in. You are, in essence, choosing to earn a lower return thereby funding the very types of people you might disagree with. > 4) No one knows what a “sin stock” really is. The only strict definition of a company that is “immoral” is something that is illegal. Aside from that, a company that operates a legal business is simply providing a service for someone who doesn’t view that business as morally contemptible. For instance, I have a very old truck that uses gas. I sometimes fill that truck up using XOM gasoline. Some people might find this morally contemptible. I do not. * https://www.pragcap.com/my-view-on-esg-investing/ https://www.pragcap.com/my-view-on-esg-investing/ I find point (2) the most interesting from an 'enact change' point of view: voting with your wallet more directly encourages either certain types of products, or how they are made, whereas the (secondary) stock market does not as much unless you can get a voting block to enact company policies at shareholder meetings. Ben Felix of PWL Capital has some videos as well (with links to the published research he cites): * https://www.youtube.com/watch?v=c4AMFicXXqg https://www.youtube.com/watch?v=c4AMFicXXqg * https://www.youtube.com/watch?v=weVAN2HxXjk https://www.youtube.com/watch?v=weVAN2HxXjk * https://www.youtube.com/watch?v=CHxNpN-2lmw&t=1416s https://www.youtube.com/watch?v=CHxNpN-2lmw&t=1416s * https://rationalreminder.ca/podcast/273 https://rationalreminder.ca/podcast/273