Publications
Publications
- 2021
The Allocation of Socially Responsible Capital
By: Daniel Green and Benjamin N. Roth
Abstract
Portfolio allocation decisions increasingly incorporate social values. We develop a tractable framework to study how competition between investors to own socially valuable assets affects social welfare. Relative to the most common social-investing strategies, we identify alternative strategies that result in higher impact and higher financial returns. From the firm perspective, increasing profitability can have a greater impact than directly increasing social value. Whether investors and firms exhibit positive or negative assortative matching depends on the nature of social preferences. We present empirical evidence that socially-guided mutual funds allocate their capital inefficiently from the perspective of generating impact and financial returns.
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, July 2021. (Revise and Resubmit, Journal of Finance.)