Just Say No: A Practical Response to Harmful Businesses

Randall Davey, CAP® Financial Advisor

December 2024

Introduction

Since 1928, some conscionable investors resisted owning shares of stock in morally questionable, unethical or harmful businesses. Religious groups particularly avoided purveyors of tobacco products, alcohol, and gaming. For most of the 20^th century, stocks in these kinds of businesses were called ‘sin stocks.’ⁱ In time, adult entertainment and armament companies were added to the list.

By the 1980’s and 1990’s, ‘sin stocks,’ took a back seat to SRI [Socially Responsible Investing], characterized by investors who deemed companies as acceptable or unacceptable based on values, sustainability and societal impact.ⁱⁱ By 2004, the anacronym ESG [Environmental, Social, and Governance] took center stage, not as a replacement of sin stocks or socially responsible investing but a nuanced version of both. ESG investors are concerned about non-financial criteria in determining if a company is investment worthy or not.

Interestingly, ESG has come under fire as “woke capitalism.”ⁱⁱⁱ That’s not the end of it. The critics of ESG and similarly, SRI, cry foul. The University of Estate Management wrote a scathing review, citing five problems with ESG funds.

It is a PR move.
It is overly complicated and too difficult to achieve.
The way it is measured is not standardized.
It is not delivering any meaningful impact on society or the environment.
The evidence that it delivers returns is not convincing.^iv

The University’s posture is mild compared to Washington Times’ columnist Greg Sindelar. He pulls no punches by calling ESG investing a fraud!^v Other critics are not as forceful but equally clear in saying that investors may not get what they are buying with ESG funds.^vi

It would be premature and errant to assume an investor has to throw in the ethical towel, powerless to make a difference. That is simply not true. While it may be difficult if not impossible to avoid any and all ties with harmful companies, investors have powerful options.

Premise

Investors can boycott.

Boycotts may not have an adverse impact on revenue, but they can take a toll on a company’s reputation. That is especially true for boycotts that generate media attention.^vii Other research shows that boycotts can be very efficacious in some instances.

“Bud Light and Target suffered plummeting sales as a result of consumer boycotts.”^viii On the other hand, corporations like Starbucks, Amazon, and McDonald’s, all subject to boycotts, were less effected due to their sheer size and power. Yet, the 2011 “Occupy Wall Street,’ set off a chain of highly publicized protests, inspiring the fight for and achievement of higher minimum wages.

One can wrest another significant example from 1978 archives. Nestle, famous for Swiss Chocolate, also made and marketed baby formula in developing nations. They argued their product was healthier than breast milk and went as far as to offer financial kickbacks to hospitals for promoting Nestle. Enter the Interfaith Center on Corporate Responsibility. They alerted Christian churches to Nestle’s unethical and harmful practices. On November 10, 1978, the National Council of Churches voted to join a massive boycott led by 32 Protestant and Orthodox Christian denominations. Nestle yielded and modified their practices (for a season).^ix

Conclusion: Just Say No.

Ethically responsible investors do have ways to protest harmful businesses, even if the way to do that may not be the way in which they participate in the market. But first, a word about protests in general.

Religious groups like the Church of the Nazarene constitute a good example of a denomination known for protesting the alcohol, tobacco, gambling, and entertainment industries. Like other protestors, they did not tackle every social issue, and their protests seemed inconsistent. For example, they held that one’s body is a temple of the Holy Spirit as justification for abstaining from alcohol and tobacco, but they were crickets on overeating. All that is to say, individual investors may alert themselves to particular concerns and blatantly ignore others. That does not undermine the importance of one’s voice.

In short, ethical investors can ‘just say no,’ to patronizing businesses they find to be morally objectionable. Here are a few examples.

Groups like the Mennonites say no to owning shares of stock in companies like Smith and Wesson. Their members can just say no to owning guns, frequenting shooting ranges, using Google, or driving Mercedes Benz, all of which benefit the war machine.^x

Other investors may want to just say no to the following businesses for cause:

Volkswagen for cheating in what proved to be an ‘emissions scandal’
BP and Exxon for making misleading and errant claims about low-carbon footprints
Nestle, Coca-Cola and Starbucks for polluting the world with plastics while insisting they are ‘eco-friendly’
Ikea for illegal logging in Ukraine
Bottled water companies for single use products contributing to a massive waste crisis^xi
Microsoft and Apple regarding child labor violations
Mars and Hershey’s both take hits for exploiting workers in Africa^xii
The gold on one’s finger may well come from the work of children as young as six years old

In short, what one drives, wears, drinks and eats may directly boost the profits of harmful, unethical companies. “Just saying no,” to Google, Apple, Microsoft, and Starbucks may be harder than saying no to Ikea but the point remains, one has a choice to say yes or no to boosting harmful companies’ bottom line.^xiii

i Portfolio Management Research. Sin Stocks Revisited: Resolving the Sin Stock Anomaly. David Blitz and Frank J. Fabozzi. The Journal of Portfolio Management. Fall 2017, 44 ( 1) 105 – 111. 4

ii The Journal of Impact Investing and ESG investing. Fall 2020. From SRI to ESG: The Origins of Socially Responsible and Sustainable Investing Blaine Townsend.

iii Corporate Governance Institute. What is the history of ESG? By Dan Byrne. (undated/online).

iv The University College of Estate Management. The Criticism of ESG: why it is becoming controversial. Oct 16, 2024. No author cited.

v Texas Public Policy Foundation. ESG is a Scam: Do not Let Texas A&M Go Woke. December 7. 2022.

vi See Randall E. Davey, “The Ethical Investors Dilemma. 2024.

vii Northwestern Institute for Policy Research. Do Boycotts Work? IPR associate finds boycotts threaten reputation more than revenue. March 29, 2017.

viii Northeastern Global News. Do boycotts against McDonald’s and Starbucks work? They can, just not for the reason you might think. December 5, 2024. Cody Mello-Klein.

ix See Corporate Accountability: Join the Global Campaign. Nestlé: Groundbreaking boycott saves millions of infant lives. January 1, 1984.

x American Friends Service Committee. Companies profiting from the Gaza Genocide. 2024. Internet.

xi See Earth.Org. 10 Companies Called Out for Greenwashing. Deena Robinson. July 17, 2022.
xii Career Addict. 15 Companies that Still Use Child Labor: Everyone has skeletons in their closet. January 25, 2024. Sion Phillpott.

xiii It is important to note that some rating agencies give Starbucks a thumbs up while others give them a thumbs down. I included in the list to suggest every consumer needs to determine the companies he or she want to support and those from whom they want to withhold business.