[drdave]

I was running money for a socially conscious Catholic hedge fund a few years back (they used monks as traders) and asked this question to the fund manager. Specifically, I wanted to short a 'culture of death' video game company which I thought was overvalued.

The fund policy was to hold no positions in any firm that violated Catholic doctrine in any way.

His response was something like this:

"Shorting and derivatives like options tend to reduce the volatility of an asset and hence, tend to improve the credit rating of the firm. So shorting can actually help a firm receive funding from banks that are reluctant to lend if the stock price is more volatile. That being said, I would not condemn anyone for shorting securities of firms engaged in immoral behavior."