Does "socially responsible investing" do any good?

Julia Galef from http://measureofdoubt.com interviews the mathematician from http://askamathematician.com about socially responsible investing. If you limit your investments to companies that uphold ethical principles you care about -- for example, environmental protection, human rights, diversity, etc. -- how much of an impact does your investment decision have?

Category:

Education

Tags:

• Julia
• Galef
• measure
• of
• doubt
• Spencer
• Ask
• mathematician
• finance
• ethics
• investing
• utilitarianism
• rationality
• socially
• responsible

[shaiper61]

U guys semm sooo boredd.... even due the subject is fasicinting;)

[JesseForgione]

The market rewards entrepreneurs to the extent that they accurately recognize under- or over-valued assets.

So the net effect (ceteris paribus) of "socially responsible investing" is to move capital from the hands of investors who care about social issues into the hands of those who don't.

A better plan would be to invest as profitably as you can, and spend the additional money convincing consumers to withdraw their support from unethical companies, and especially from the state.

[DevilsAdvocateism]

So because you invest in good companies, their stock price goes up. Causing them to get less investments from other investors who would have otherwise invested because of the cost increase and the reverse psychological effect of thinking it was a bubble. Also because the evil companies stock would be more appealing financially.

Is it possible for a good company to start off needing investments then grow to be dominate by being good, or would they have to be evil to become dominate?

[DevilsAdvocateism]

lol, the evil companies don't always win do they? I don't know enough about all the individual companies I rely on to know what my part is in giving evil companies my money, but I thought I should recognize that I didn't mean to say evil companies always win, they can't always win right?

[DevilsAdvocateism]

Your model of trying to 'use investments to help good companies' vs 'using investments to just make money' and how these two incentives interact in the market having the evil companies always win if:

1/3 of the market is investing for good companies and 2/3 of the market is investing to make money

Does that mean if 51% of the market invested only in good companies, the theory would work because there wouldn't be the counter effect? Must be a lot of evil companies/ investors right now.

[ascassady]

In other words: finance isn't a science.

[logician15]

Couldn't this analysis be applied more generally to the upward price pressures caused by buying things that have been produced in a morally good way? That is, isn't this a problem with capitalism? Or does it cause more actual harm for prices of 'real' products to go down than it does if merely stock price go down?

[HitfulVids]

Buying up the shares of a good company can prevent a hostile takeover by an evil company. But perhaps it would be more effective for "socially responsible" people to get together and buy up voting shares in evil companies in order to replace the management.

Most importantly, don't invest in companies with stupid business plans like buying up prime real estate to build parks. Otherwise, the socially responsible people will be poor and the investment issue moot.