If you are interested in ESG funds, this is the only way that they can make much of a difference.Also take a look at VOTE to see if it meets your needs. We like it and use it for a substantial portion of our index fund positions alongside FZROX. Tracks the index but does the legwork to vote their share holdings along the lines of ESG principles.
If it's just a "tilt" towards or away from certain sectors, then the market will move to correct that undervaluation (of "dirty" stocks) that you have created. In the extreme case, via a Private Equity LBO transaction.
You see this with tobacco stocks over the last 30 years. Society, and to some extent the stock market, revile them. Smoking is now banned indoors in public spaces in the UK (pubs restaurants malls etc) -- unimaginable in 1990. The stocks have traded on low Price to Earnings ratios.
Yet they have minted money for investors. Altria, Imperial Tobacco, British-American Tobacco.
Oil refiners would be another example of such an industry. People like Ineos, the largest private petrochemical company in the world I think? have bought up refineries & basic petrochemical plants, and made a fortune. See also Koch Industries.
However if a fund actually lobbies at the AGMs and seeks to "shame" other investors into support, then it can make a difference.
This is all described theoretically by a founder of the field of corporate governance, Albert Hirschman
https://en.wikipedia.org/wiki/Exit,_Voice,_and_Loyalty
A O Hirschman.
In effect Exit, in capital market terms, is unlikely to have much effect. Voice can have an affect (although it might drive some companies out of a public listing).
Statistics: Posted by Valuethinker — Wed Jun 26, 2024 7:13 am — Replies 28 — Views 1967