So I think the divestment argument that Buck is making is the following:
Assume there are 25 investors, from Alice to Ysabel. Each investor is risk-averse, and so is willing to give up a bit of expected value in exchange for reduced variance, and the more anticorrelated their holdings, the less variance they’ll have. This means Alice is willing to pay more for her first share of EvilCorp stock than she is for her second share, and so on; suppose EvilCorp has 100 shares, and the equilibrium is that each investor has 4 shares.
Suppose now Alice decides that the moral loss of holding EvilCorp stock is larger than the financial gain of having another less-correlated asset, and so offers to sell her EvilCorp shares. The value-to-Alice of those shares before was the 1st share value + 2nd share value + 3rd share value + 4th share value, but the value-to-buyers will be the 5th share value (times 4), which by risk aversion is lower than the 4th share value that it was at before. [This is why you wouldn’t just buy it yourself; you already have 4 shares, and a fifth share is worth less to you than your fourth share.]
As more and more investors divest from EvilCorp, the remaining people willing to invest in EvilCorp find it becoming a larger and larger fraction of their holdings, meaning they pay more in variance, making it less attractive. If there are sufficiently large risk-neutral investors, or sufficiently many small risk-averse investors who don’t own any shares of it yet, divestment barely shifts the value of EvilCorp; if there aren’t, divestment can seriously restrict their access to capital.
So I think the divestment argument that Buck is making is the following:
Assume there are 25 investors, from Alice to Ysabel. Each investor is risk-averse, and so is willing to give up a bit of expected value in exchange for reduced variance, and the more anticorrelated their holdings, the less variance they’ll have. This means Alice is willing to pay more for her first share of EvilCorp stock than she is for her second share, and so on; suppose EvilCorp has 100 shares, and the equilibrium is that each investor has 4 shares.
Suppose now Alice decides that the moral loss of holding EvilCorp stock is larger than the financial gain of having another less-correlated asset, and so offers to sell her EvilCorp shares. The value-to-Alice of those shares before was the 1st share value + 2nd share value + 3rd share value + 4th share value, but the value-to-buyers will be the 5th share value (times 4), which by risk aversion is lower than the 4th share value that it was at before. [This is why you wouldn’t just buy it yourself; you already have 4 shares, and a fifth share is worth less to you than your fourth share.]
As more and more investors divest from EvilCorp, the remaining people willing to invest in EvilCorp find it becoming a larger and larger fraction of their holdings, meaning they pay more in variance, making it less attractive. If there are sufficiently large risk-neutral investors, or sufficiently many small risk-averse investors who don’t own any shares of it yet, divestment barely shifts the value of EvilCorp; if there aren’t, divestment can seriously restrict their access to capital.