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• Working Paper | 2020

  The Allocation of Socially Responsible Capital

  Daniel Green and Benjamin N. Roth

  A rapidly increasing share of asset allocation decisions incorporate social values in addition to financial considerations. We argue that the most common strategies for socially motivated investing, which only consider the social value of the firms in an investors’ portfolio, are misguided. We develop a tractable framework in which commercial and social investors compete, and identify alternative strategies for social investors that result in higher social welfare and deliver higher financial returns. We discuss several normative implications for socially-motivated investors. From the enterprise perspective, we demonstrate that a focus on increasing profitability can have a greater social impact than a focus on direct social value creation.

  Keywords: socially responsible investing; Assets; Resource Allocation; Social Issues; Decision Making; Strategy; Framework;

  Citation:

  Green, Daniel, and Benjamin N. Roth. "The Allocation of Socially Responsible Capital." Working Paper, August 2020.  View Details

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• Case | HBS Case Collection | February 2020 (Revised March 2020)

  Prime Coalition: Catalytic Capital for Climate Innovation

  Ramana Nanda, Benjamin N. Roth and Olivia Hull

  With long development timelines and high risk, new energy technologies were often left to languish in the “valley of death,” unable to raise enough funds to bring a product to market. In 2014, Sarah Kearney founded the nonprofit Prime Coalition to solve this problem. At the beginning, Prime’s role as a financial intermediary involved seeking out the most promising market-based technology solutions to climate change and recruiting foundations or philanthropists to fund them. In 2019, Prime changed course, adopting a portfolio approach with its Prime Impact Fund. By the end of the year, Prime had raised $40 million in philanthropic capital for its new fund. Once the funds were invested in promising energy startups, Prime planned to try its hand at recruiting traditional investors to back the same companies. Could Kearney convince traditional investors that these investments were worth the risks?

  Keywords: Energy Conservation; Renewable Energy; Social Entrepreneurship; Venture Capital; Investment; Innovation and Invention; Technological Innovation; Mission and Purpose; Science-Based Business; Nonprofit Organizations; Social Enterprise; Energy Industry; Technology Industry; Green Technology Industry; United States;

  Citation:

  Nanda, Ramana, Benjamin N. Roth, and Olivia Hull. "Prime Coalition: Catalytic Capital for Climate Innovation." Harvard Business School Case 820-007, February 2020. (Revised March 2020.)  View Details

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• Working Paper | HBS Working Paper Series | 2020

  Contractual Restrictions and Debt Traps

  Ernest Liu and Benjamin N. Roth

  Microcredit and other forms of small-scale finance have failed to catalyze entrepreneurship in developing countries. In these credit markets, borrowers and lenders often bargain over not only the interest rate but also implicit restrictions on types of investment. We build a dynamic model of informal lending and show this may lead to endogenous debt traps. Lenders constrain business growth for poor borrowers yet richer borrowers may grow their businesses faster than they could have without credit. The theory offers nuanced comparative statics and rationalizes the low average impact and low demand of microfinance despite its high impact on larger businesses.

  Keywords: Entrepreneurship; Developing Countries and Economies; Microfinance; Problems and Challenges;

  Citation:

  Liu, Ernest, and Benjamin N. Roth. "Contractual Restrictions and Debt Traps." Harvard Business School Working Paper, No. 20-088, February 2020. (Revised July 2020.)  View Details

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