Sunday, 25 October 2015

Divestment doesn't work (but then we knew that)


The economists Harrison Hong and Marcin Kacperczyk found that sin stocks outperform other stocks by 2.5 per cent per year. This has even resulted in a niche industry: for instance, the Barrier Fund, formerly known as the Vice Fund, is a “sin-vestor” mutual fund that exclusively invests in companies that are significantly involved in alcohol, tobacco, gambling, or defense. It has beaten the S. & P. 500 by an average of nearly two percentage points per year since 2002. By divesting from unethical companies, “ethical” investors may effectively transfer money to opportunists like the Barrier Fund, who will likely spend it less responsibly than their “ethical” counterparts.

It's not just that those sin stocks outperform the market but that divestment campaigns actually contribute to this outperformance. As we discovered in Bradford last week, this doesn't stop self-appointed campaigners virtue-signalling by proposing (at no loss to themselves of course) pension funds pull out from those "sin stocks".


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