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Publications
  • 2021
  • Working Paper

The Allocation of Socially Responsible Capital

By: Daniel Green and Benjamin N. Roth
  • Format:Print
  • | Language:English
  • | Pages:58
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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.)
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About The Authors

Daniel W. Green

Finance
→More Publications

Benjamin N. Roth

Entrepreneurial Management
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More from the Authors

    • March 2023 (Revised April 2023)
    • Faculty Research

    Independent Governance of Meta’s Social Spaces: The Oversight Board

    By: Jesse M. Shapiro, Natalia Rigol, Benjamin N. Roth and William R. Kerr
    • 2022
    • Faculty Research

    What Do Impact Investors Do Differently?

    By: Shawn A. Cole, Leslie Jeng, Josh Lerner, Natalia Rigol and Benjamin N. Roth
    • 2022
    • Faculty Research

    Can Finance Save the World? Measurement and Effects of Coal Divestment Policies by Banks

    By: Daniel Green and Boris Vallée
More from the Authors
  • Independent Governance of Meta’s Social Spaces: The Oversight Board By: Jesse M. Shapiro, Natalia Rigol, Benjamin N. Roth and William R. Kerr
  • What Do Impact Investors Do Differently? By: Shawn A. Cole, Leslie Jeng, Josh Lerner, Natalia Rigol and Benjamin N. Roth
  • Can Finance Save the World? Measurement and Effects of Coal Divestment Policies by Banks By: Daniel Green and Boris Vallée
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