Is ethical investing actually a thing, or is that a contradiction in terms?

Been chewing on this for a while and I still don't have a clean answer. Ethics matter a lot to me personally, more than I think comes across in most finance discussions, and honestly I sometimes feel a bit of a bad conscience about investing at all, which is probably why I keep circling back to this question instead of just letting it go

The basic case against "ethical investing" being real: you're buying shares on the secondary market. Your money doesn't go to the company, it goes to whoever sold you the shares. So buying stock in a company doing good stuff doesn't actually fund that stuff, and selling stock in a company doing bad stuff doesn't defund it either. You're just shifting who owns a piece of paper. The actual operations keep running exactly the same either way

But capital allocation isn't only about the secondary market. If enough investors avoid a sector, that sector's cost of capital goes up. IPOs get priced lower, bonds get pricier to issue, and companies feel that eventually, even if your hundred shares alone change nothing. So there's a real argument that this works at scale even though it does nothing at the individual level

Then there's ESG, which honestly feels like theater to a lot of people at this point. Companies buy good ESG scores through disclosure and PR more than actual behavior change, and some of the highest rated names have pretty questionable practices once you look past the scorecard. So even when people genuinely try to invest ethically, the tools they're handed might not measure what they think they're measuring

And there's the more cynical take, that investing has a built in tension with ethics because the whole premise is extracting return from capital, which usually means someone somewhere gets paid less than the value they create so the difference can flow to shareholders. Under that lens "ethical investing" is more of a marketing term than a real category, and the honest options are either don't invest at all, or admit you're optimizing for return and put the ethics somewhere else in your life

I keep coming back to that last option because it feels the most honest even though it's uncomfortable to sit with. I still invest. I just don't fully let myself off the hook about it

Where do you land on this. Meaningful concept, mostly symbolic gesture, or somewhere in between?