Does socially responsible investing make the world a better place?

See Even $1 Trillion Can’t Make World Better Place: Norway’s sovereign-wealth fund reversed its ethical ban on owning shares in five companies after they changed their ways, but cause and effect is hard to discern by James Mackintosh of The WSJ. Excerpts:

"Norway’s $1 trillion Government Pension Fund Global invests in line with its ethics, which means blacklisting about 150 stocks from its portfolio, for reasons including human-rights violations, making especially nasty weapons or being involved in tobacco.

Last week, the fund’s ethics committee allowed five banned stocks back into its investment list after the companies mended their ways. This creates an interesting experiment: Are Norwegian ethics imposed on the world having an impact?

Two of the readmitted companies had merely sold the businesses that offend the Norwegians, so the changes have no real-world effect.

Billionaire Carlos Slim’s Grupo Carso in Mexico sold its tobacco business to Philip Morris International , so it no longer makes the cigarettes that offend the Norwegians. This happened six years ago (it took Norway a long time to be sure), so we can measure the lack of impact: Mexicans now smoke a billion more cigarettes each year than they did at the time of the sale."

"It is hard to know whether Norway or other investors had any effect, though. Walmart has also been under pressure from consumer groups over issues of child labor and safety violations in its supply chain. It became much more active after a 2013 building collapse killed more than 1,100 workers including some at a subcontractor in Bangladesh. A tight jobs market also makes improved working conditions in the U.S. a better business proposition, to ease recruitment."

"If the impact is hard to pin down, the cost is more observable. According to its annual study, the fund underperformed its benchmark by a cumulative 1.1 percentage points because of the exclusions since 2006."

Related posts:

Is it a retailer’s job to keep shoppers from their vices? (or Adam Smith vs. CVS pharmacy)

Can You Find Virtue by Investing in Vice?

What if companies pledge to adhere to social and environmental accountability guidelines?

Conspicuous Consumption, Conspicuous Virtue, Thorstein Veblen (and Adam Smith, too!) 

Data show that socially responsible investments can outperform the S&P 500 index
 
Is altruism a result of selfishness?

Do you have to be selfish to make more money?

Does collective self-deception mask selfish behavior? 

Why Doing Good Makes It Easier to Be Bad

For a humorous view of this issue see

A Snickers a Day Keeps the Doctor Away: Why does CVS want to make my migraine cures hard to find? by Joseph C. Sternberg of the WSJ