Does Ownership or Avoidance of an 'Irresponsible' Company Make a Difference?
Wouldn't those shares be owned by a different investor?
This question, received last week from a webinar attendee, is one that I hear some version of on a regular basis. I'll get to whether avoiding an irresponsible company makes a difference, but first keep in mind that even though the terms "responsible" and "sustainable" investing are often used interchangeably today, the use of “irresponsible" here obscures the main thrust of what I prefer to call "sustainable investing."
Virtually all sustainable funds today are focused on integrating the consideration of environmental, social, and corporate governance issues in the investment process rather than just flatly avoiding so-called irresponsible companies. The role of ESG varies by fund. Some may consider ESG only in extreme cases and even then may not avoid a company with ESG-related problems if its stock is priced right. For others, ESG analysis is more central to every security-selection and portfolio-construction decision.