3 Reasons “Sin Stocks” are robust and secretly kept an eye on.
“Sin stocks”, which are shares of companies that are considered unethical or immoral by some, such as tobacco, alcohol, gambling, pornography and firearms, have been a subject of debate among investors and ESG policymakers.
Here are 3 reasons why sin stocks are secretly being watched:
- Sin stocks are considered inelastic, which means they tend to be recession-proof, but they face more regulatory and political risk than other stocks.
- Sin stocks are considered defensive stocks, meaning they tend to perform well even during an economic downturn, but they also tend to face more social and regulatory scrutiny.
- Research by Scientific Beta suggests that avoiding sin stocks is no longer enough for ESG ETFs, and that ESG stocks tend to perform better when the media scrutinises their ESG practices.
These insights suggest that while sin stocks may be defensive and perform well during economic downturns, they also face regulatory and social risks that other stocks do not.
Furthermore, the growing interest in ESG factors among investors and policymakers suggests that companies with poor ESG practices may face increasing scrutiny, which could affect their long-term viability. Therefore, investors who are interested in ESG factors may want to consider avoiding sin stocks or investing in companies that have better ESG practices. However, it is important to note that not all investors prioritise ESG factors and may still invest in sin stocks if they believe it is a profitable investment.
