Socially Responsible Investment in the alcohol industry: an assessment of investor attitudes and ethical arguments

Abstract

I examine and evaluate the ethical standards and arguments that Socially Responsible Investment (SRI) investors use when they deselect the alcohol industry and alcohol corporations. The alcohol industry was the first industry excluded by SRI investors and is, relative to fund size, the second most prominent negative screen (after tobacco). I discuss the role of shareholder democracy in the alcohol industry, review some evidence on the financial effects of SRI on sin stocks and investigate the motivations that SRI investors may have to eschew investment in the alcohol industry (almost no motivation can be found). I discuss a number of ethical issues that are salient in the alcohol industry and that ought to concern ethical investors. I draw attention to, in particular, the marketing of alcopops (flavoured alcoholic beverages or malternatives such as Smirnoff Ice and Bacardi Breezer), and strategies involving so-called beer girls. This prepares the way to a reconstruction of two kinds of arguments that SRI investors might implicitly adhere to when they put a negative screen on alcohol: a Public Goods Argument and a Religious Values Argument. I show that the Public Goods Argument is problematic because it risks democratic legitimacy and effectiveness, and that while the Religious Values Argument is a coherent defence for individual investors accepting particular religious views, it is unacceptable if used by institutional investors forcing religious values upon involuntary participants when no societal unanimity concerning these religious values exists. Pension funds and health-care plans are examples of such investors. Finally, I provide an alternative Ethical Issues Argument and defend the claim that there are no good moral reasons for institutional SRI investors to circumvent the alcohol industry; rather, they should use shareholder democracy to make alcohol corporations address the ethical issues lest these issues will never be addressed by the corporations themselves.