The definition of a “sin stock” varies with different investors or institutions. Companies that participate or manufacture products related to defense, tobacco, alcohol, and gambling are some of the first to be eliminated from the portfolio. The catholic church will eliminate companies that put out birth control products. For other investors, they see birth control as essential. That is why I say, it varies from investor to investor.

Many Chinese companies are eliminated due to treatment of workers. Human rights is difficult to monitor, but there is an organization, KDL, that will build custom screens for institutions so they know which companies to include and which to exclude from the portfolio. Only a very wealthy private investor would subscribe to such a service.

One of the negatives, and about the only one I can think of, for investing in ETFs has to do with socially responsible investing. As I mentioned before, when I ran an analysis on “sin stocks” held in ETFs, most were in the Large-Cap Value ETF. The other place I found a large concentration was in the Chinese ETF, FXI. This was one reason why I sold my FXI holdings.

Lowell

Thanks,
Joel