Many believe that investors can contribute to a more sustainable world by divesting from firms with the worst sustainability profiles. However, exclusion comes down to a transfer of ownership from sustainability-minded investors to other investors, and it is not obvious how this is supposed to lead to changes for the better in society. This article critically examines the arguments for exclusion and concludes that the effectiveness of exclusion policies is questionable. Investors may well achieve more by exerting influence as an active shareholder through voting and engaging with firms.

ESG investing, Portfolio construction*, Portfolio theory
dx.doi.org/10.3905/jpm.2020.46.3.042, hdl.handle.net/1765/129095
Journal of Portfolio Management
Erasmus University Rotterdam

Blitz, D.C, & Swinkels, L.A.P. (2020). Is exclusion effective?. Journal of Portfolio Management, 46(3), 42–48. doi:10.3905/jpm.2020.46.3.042