Socially Responsible Divestment

Alex Edmans, Doron Levit, Jan Schneemeier

2023 | Academic | Divestment, Portfolio Construction, Sustainable Investing

Blanket exclusion of 'brown' stocks is seen as the best way to reduce their negative externalities by starving them of capital. We show that a more effective strategy may be tilting -- holding a brown stock if the firm has taken a corrective action.