Matt Levine really likes the Cliff Asness take on socially responsible investing. Which, in short, says that if virtuous people avoid a stock, then the price of that stock will fall, thereby increasing the returns reaped by the people who aren’t virtuous and who buy it.

Asness claims that if the stock price doesn’t fall, “there is no effect on the world, no good deed done at all,” and Levine seems to judge divestment strategies on a similar basis, asking whether capital markets are “doing much to cut down on sin”.


Both of them, then, buy into the idea that the only reason to avoid “sin stocks” is to somehow punish the company for being sinful. But that’s not true at all. If some people avoid certain stocks, those stocks are not going to get noticeably cheaper. That might be how the stock market works in some airless economics model, but it’s not how the market works in practice.

The kind of people who divest from sin stocks are not, and never will be, marginal price-setters. If you think you’re somehow punishing a company by not buying its stock, you’re frankly delusional.

But it’s still virtuous to avoid those stocks! I’ll repeat myself from a long piece I wrote a couple of years ago: the main reason to divest from sin stocks such as fossil fuel companies is simply that it’s the right thing to do. By owning shares in these companies, investors profit from activity which is making the world a worse place. They don’t need to do that, so they shouldn’t.


Divestment is a political gesture. It’s idealistic, rather than technocratic. It’s the right thing to do even if it turns out to be utterly futile.

Don’t listen, then, to Matt and Cliff. If you think it’s bad to own sin stocks, there’s no harm in listening to your intuitions. And if you think it’s OK to own broad indices, even if those indices include sin stocks, that’s OK too. This is an ethical decision you’re making, after all. Not a practical one.