Are socially responsible funds viable?
Type
conference contribution
Date Issued
2026-08-21
Author(s)
Abstract
We study the viability of socially responsible (SR) funds when investors are small, have social preferences, and can cheaply invest in other ways. In a static setting, SR “impact” funds, which engage with dirty firms at a cost, cannot exist due to free riding, regardless of the type of social preferences. SR exclusion funds with reduced ownership of dirty firms can exist, but only if investors’ social preferences are “warm glow,” i.e., tied to the extent of ownership. In a dynamic setting, we demonstrate that such exclusion funds endogenously make impact funds viable. Impact funds profit by making dirty firms investable for exclusion funds.
HSG Classification
contribution to scientific community
Refereed
No
Event Title
European Finance Association 53rd Annual Meeting
Event Location
Ghent (Belgium)
Event Date
19.-22. August 2026
Subject(s)
Division(s)