For the “missing the point” files — Alicia Adamczyk acknowledges that there are some economic advantages to SRI or ESG investing:
There are some benefits beyond a clear conscious. A 2016 report from Bank of America found that an “investor who only held stocks with above average-ranks on both Environmental and Social scores would have avoided 15 of the 17 bankruptcies we have seen since 2008,” and that “companies that ranked well [on ESG scores] had, on average, a 5% higher subsequent return on total equity than did their poorly ranked counterparts.”
And yet she concludes, without any quantifiable basis or documentation, that moral or social financial choices are more effective as a consumer than an investor.
“While I don’t disagree with the rationale for wanting to exclude certain companies that are not deemed socially or morally responsible I don’t necessarily agree that it should be applied to investing,” says Scott Salaske, CEO of Firstmetric, a financial advisory firm. “When you really get down to it, you can find fault with most companies that are not upholding specific beliefs or morals.” Salaske says not patronizing businesses whose practices you don’t agree with, like the #GrabYourWallet movement, is more likely to make a difference than not investing in them.
The assumption that there is a necessary trade-off between returns and ethics, or that even if there is that it is beyond the capacity of investors to understand and make judgements on is first of all not true and second of all undermined by the article’s own findings.