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rpmcruz comments on Call for information, examples, case studies and analysis: votes and shareholder resolutions v.s. divestment for social and environmental outcomes - Less Wrong Discussion
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Comments (33)
only if they do so in total secrecy.
If you're an analyst in a big trading firm you know that ,say, an oil company exists and is currently valued at a certain level by the market taking into account the available information about it's business and profits.
Later that company is targeted by divestment activists. A big university is pressured by economically illiterate students into selling all it's stock in the oil company.
The analyst's note this and know that the company is probably being slightly undervalued as a result and buy up some stock.
There are actually Sin Funds that target stock of companies like tobacco, fossil fuel companies etc and invest in them on the basis that they're likely slightly undervalued due to other "moral" investors avoiding them.
Thus the only effect of divestment is to transfer a moderate amount of money from yourself to people who are slightly less ethical. It doesn't hurt the company at all.
That is a good point. The stock market is probably more competitive than whatever market the company is in, so, for every one moral investor, there are infinite more that are amoral.
Again, that is a good point, and I already had it in mind when I posted my reply. The person I was replying to did not articulate it correctly.
Still, I do not think the original question should be dismissed outright. The fact is that not even the stock market is perfectly competitive. There are not infinite players in either side. For instance, if you look at Islamic countries, you can find countries where close to 100% are religious https://en.wikipedia.org/wiki/Islam_by_country. I can imagine how a religious figure could possibly bankrupt a company by talking to banks alone and draining the company out of capital (without ever talking to customers). My point is that even in highly competitive markets maybe activists can have an influence. I find it very unlikely. I still think dismissing that question outright is anti-scientific.
Sure, if you could coordinate with almost all players in a market and got them to agree to give up financial gain to achieve your goals without any defecting then it would work. Though that's a mighty big "if" in any large market.