Get new articles by email:

Oblivious Investor offers a free newsletter providing tips on low-maintenance investing, tax planning, and retirement planning.

Join over 19,000 email subscribers:

Articles are published every Monday. You can unsubscribe at any time.

Investing Blog Roundup: The Impact of Impact Investing

A recent paper from Jonathan Berk and Jules H. van Binsbergen took a look at “The Impact of Impact Investing” (a.k.a. ESG investing or socially responsible investing).

Their conclusion:

“We conclude that at current levels impact investing is unlikely to have a large impact on the long-term cost of capital of targeted firms. A substantial increase in the amount of socially conscious capital is required for the strategy to affect corporate policy. [Mike’s note: elsewhere in the paper, they estimate that in order to cause a 1% change in the cost of capital, impact investors would need to control more than 80% of all investable wealth.] Given the current levels of socially conscious capital, a more effective strategy to put that capital to use is to follow a policy of engagement. By purchasing the stock in targeted companies rather than selling the stock, socially conscious investors could potentially have greater impact by exercising their rights of control through the proxy process or by gaining a majority stake and replacing upper management.”

This is the case I have been making for years. But from a purely financial point of view, it’s clear that investing in broadly diversified low-cost mutual funds (rather than buying a handful of individual stocks) is the best decision. And unfortunately when we invest via mutual funds, we give up our voting rights in the underlying shares. The fund company gets to vote those shares instead (or not vote them).

Nearly 20 years ago (December 2002) Jack Bogle argued to the SEC that mutual fund shareholders should have a right to know how fund managers vote the fund’s shares. Unfortunately, the availability of such information is still quite limited.

Other Recommended Reading

Thanks for reading!

New to Investing? See My Related Book:

Book6FrontCoverTiltedBlue

Investing Made Simple: Investing in Index Funds Explained in 100 Pages or Less

Topics Covered in the Book:
  • Asset Allocation: Why it's so important, and how to determine your own,
  • How to to pick winning mutual funds,
  • Roth IRA vs. traditional IRA vs. 401(k),
  • Click here to see the full list.

A Testimonial:

"A wonderful book that tells its readers, with simple logical explanations, our Boglehead Philosophy for successful investing." - Taylor Larimore, author of The Bogleheads' Guide to Investing
Disclaimer: By using this site, you explicitly agree to its Terms of Use and agree not to hold Simple Subjects, LLC or any of its members liable in any way for damages arising from decisions you make based on the information made available on this site. I am not a registered investment advisor or representative thereof, and the information on this site is for informational and entertainment purposes only and does not constitute financial advice.

Copyright 2022 Simple Subjects, LLC - All rights reserved. To be clear: This means that, aside from small quotations, the material on this site may not be republished elsewhere without my express permission. Terms of Use and Privacy Policy

My new Social Security calculator (beta): Open Social Security