• Graduate program
  • Research
  • News
  • Events
    • Events Calendar
    • Events Archive
    • Summer School
      • Climate Change
      • Gender in Society
      • Inequalities in Health and Healthcare
      • Business Data Science Summer School Program
      • Receive updates
    • Tinbergen Institute Lectures
    • Annual Tinbergen Institute Conference
  • Summer School
    • Climate Change
    • Gender in Society
    • Inequalities in Health and Healthcare
    • Business Data Science Summer School Program
    • Receive updates
  • Alumni
  • Magazine
Home | Events Archive | A Theory of Socially Responsible Investment
Seminar

A Theory of Socially Responsible Investment


  • Location
    Erasmus University, Mandeville Building, Room T3-42
    Rotterdam
  • Date and time

    November 26, 2019
    15:30 - 16:45


Abstract

Based on a canonical model of corporate financing under agency frictions we characterize how and when socially responsible investors can affect firm behavior and derive an investment criterion, the social profitability index (SPI), to guide scarce socially responsible capital. The SPI highlights the importance of counter- factual social costs that would arise in the absence of socially responsible investors. Accordingly, most existing ESG metrics are not suited to guide investment decisions. Our model also uncovers a complementarity between financial capital and socially responsible capital: The presence of financial investors without regard for externalities can raise welfare relative to a setting with only socially responsible investors.