Impact Of Negative Screening Overstated

Investors who exclude sin stocks from their portfolios, hoping to hurt these companies’ valuations and access to capital, may be disappointed in the actual impact, says a paper by Robert Eccles, a visiting professor at Said Business School at Oxford University; Shiva Rajgopal, a professor at Columbia Business School; and Jing Xie, an assistant professor at Hong Kong Polytechnic University. ‘Does ESG negative screening work?’ found that negative screening for sin stocks has little effect on the firm valuations, stock prices, exits, and returns when compared to non-sin stocks of companies with similar fundamentals. “In sum, we argue that claims that negative screening hurts sin stocks are somewhat overstated,” say the authors. “The underlying empirical reality, at least since 2000, is more nuanced and complicated and depends on the research design used.”