By tracking the amount of “socially conscious capital,” the targeted companies and those firms’ correlation to the rest of the market, the pair found the impact on the cost of capital was “too small to meaningfully affect real investment decisions.”
Polluters Surge
Anecdotal evidence certainly suggests that less ESG friendly companies are going unpunished by the market.
This year some of the biggest emitters of carbon dioxide in the world have enjoyed sizable share-price gains, including Exxon, Chevron Corp. and ConocoPhillips. Glencore Plc, which has been blacklisted by the Norwegian Sovereign Wealth Fund since May 2020 due to its exposure to coal, is up more than 50%.
As BlackRock plots how to make participation easier for more of its clients, the trend looks set to pick up.
The U.S. Securities and Exchange Commission last week proposed new rules that would make funds more transparent about how they vote at shareholder meetings, potentially handing more influence to investors to shape the way money managers vote.
At Engine No. 1, the firm has launched an ETF pledging to use its shareholder rights to affect change, rather than divestment. Its ticker? VOTE.
In the paper, “The Impact of Impact Investing,” Berk and Van Binsbergen conclude that divesting is unlikely to have a meaningful impact in the future because socially responsible capital is such a small part of the total.
“Our results suggest that to have impact, instead of divesting, socially conscious investors should invest and exercise their rights of control to change corporate policy,” they wrote.
--With assistance from Lars Erik Taraldsen and Silla Brush.
This article was provided by Bloomberg News.