Click the Bloomberg screen to read a news article about Blackrock's move to proxy votes. According to research, what ESG approach is more effective at affecting change? Investment and Active Ownership ESG Integration Positive Screening Divestment \"A substantial increase in the amount of socially conscious capital is required for the strategy to affect corporate policy,\" authors Jonathan Berk and Jules Van Binstergen wrote in tha August paper. \"Given the current levels of socially conscious capital, a more effective strategy to put that capital to use is to follow a policy of engagement.\" Berk and Van Binsheroen -- from the Stanford Graduate School of Business and the Wharton School, respectively -- started with the assumption that effective divesting should result in higher costs of capital for the cornpany that's been sold. By tracking the amount of \"socially conscious capital,\" the targeted companies and those firms' correlation to the rest of the market, the pair found the impoct on the cost of capital was \"too small to meaningfolly affect real investmert decisions,\" Polluters Surge going unpunished by the market. enjoyed sizoble share-price gains, including Loxon, Chevron Corp, and than 100. As BlackRexk plots how to rake participalicn easiker for mare of ils clitents, the trend looks set to pick up. The US. Securitios and Exdunge Commission lasl week propesed new rules that would make funds more transparent about how they vote at shartholder meetings, potentially handing more influence to investors to shape the way moncy managers vote. At Engine No. 1, the firm has launched an EIf pledging to use its shareholder rights to affect changs, rather than divestment. Its ticker? volt. conclude that divesting is unlikcly to have a meaningful impact in the future bocause socially responsible capital is such a small part of the total. \"Our results suggest that to have impact, instead of divesting, socially conscious investors should invest and exercise their rights of control to change corporate policy,\" they wrote. (Retops earlier article with BlackRock's arnouncement, adds new context.) Assets in tSG tifs have surged over the past year. Source: Bloomberg fintlloence. Perhaps because it's easier, a lot of Wall Street ESG strategies have evolved around the former approach. Blackfock itself is the biggest issuer of E5G exchanoe-traded funds, which are marketed to investors as a way to steer cash toward good companies and away from bad ones. Yet some of the most eye-catching corporate changes have been brought about by active investors, such as Engine No. 1's victory in a fight to qet bourd seats at Exconlfobil Corp, one of the world's biggest emitters of carbon dioxide. Tracking Costs Recent research halps explain why the latter strategy is winning new believers. Even as billions of dollars diverts toward firms scoring higher on ESG measures, the funding costs for bad actors have hardly bodgod, according to the stubly. It suggests that portfolio allocation ultimately does little to correct unethical behavior in the corporate world. \"A substantial increase in the amount of socially conscious capital is required BlackRock's Landmark Move on Proxy Votes Fuels a Big ESG Debate - Giant money manager says it is handing more pover to imvestors - Research suggests ESG divestment has only tiny impact By Tasneem Hanfl Broyer and San Potter (Gloomberg) -- A blackkock inc. decision to give some of its biggest clients more power to vote at shareholder mectings just added a new twist to the raping debate at the heart of LSG investing. Ihe world's largest asset manager revealed on Ihursday that from next yoar, votes. The move will apply to about \10 of \\( \\$ 1.8 \\) trillion in index equity assets that blackKock manages. a \"vast reallocation\" of capital into environmental, social and governance strategies. But amid the boom, there remain big questions over what constitutes an effective ESG approach. The core of the dilemma: Is it better to punish companies that fall short by selling out, or to stay vested and try to bring about improvernents through active ownershin