It's super important to be thinking about the actual impact of impact investing. There's a lot of rhetoric out there that's not backed up, and this paper does a good job of pointing out that in public markets, investing doesn't impact stock price. That said, there's a few things related to public market investing that could use some more investigation.
1. I don't think many public equity impact investors see their primary means of impact as shifting stock price. They create impact through your point 6 - signaling and improving portfolio companies. A more thorough exploration of the potential impact of signaling and the direct impact of shareholder advocacy compared to the impact of donations would make your argument more compelling.In the report, you say that "Thus, the indirect effects of divestment campaigns are likely to be much greater than the direct effects.This being said, we think that, given the financial opportunity costs of socially responsible investing, for people aiming to have maximal social impact, socially neutral investing to donate to effective charities will usually be more effective."
Could you point out the justification for this claim? It certainly might be true, but I'm wondering what makes you think it is so. Also I think it's really important to consider the wealth of literature supporting the impact of shareholder advocacy. This paper has a nice summary of some of that literature:
2. You note that the assumption of reduction in financial performance from ESG investing isn't backed up by empirical evidence - you note in your report that there is no clear relationship shown in the literature. But it seems like you find the theoretical argument compelling enough to overcome the empirical data - which is not impossible, there could be noise that leads to inconclusive empirical data. But, I am not convinced that the theoretical argument is iron-clad enough to overcome the ambiguity in empirical data.
From your report: "Overall, our view is that screening portfolios will reduce expected financial performance. There is no theoretical explanation for the finding from some studies that screening one’s portfolio improves or does not harm financial performance." The assumption seems to be that ESG performance is orthogonal to financial performance, I may have missed where this is justified.
A possible theoretical explanation of why screening doesn't hurt performance: It could be possible that ESG performance is actually a driver of financial performance (or at least risk reduction)? Every active investor has a funnel. Some screen out companies with low profit margins because of a particular investment thesis. Others screen out companies with poor ESG performance because of a particular investment thesis. This idea is becoming more popular - that ESG investing is a part of good investing. See SASB for some of the case that ESG performance impacts financial performance.