Seminar – A Theory of Socially Responsible Investment

Professor Martin Oehmke, Professor of Finance, London School of Economics

We characterise necessary conditions for socially responsible investors to impact firm behavior in a setting in which firm production generates social costs and is subject to financing constraints. Impact requires a broad mandate, in that socially responsible investors need to internalise social costs irrespective of whether they are investors in a given firm. Impact is optimally achieved by enabling a scale increase for clean production. Socially responsible and financial investors are complementary: jointly they can achieve higher welfare than either investor type alone. When socially responsible capital is scarce, it should be allocated based on a social profitability index (SPI).

This micro founded ESG metric captures not only a firm’s social status quo but also the counterfactual social costs produced in the absence of socially responsible investors

To join the seminar, join the Zoom meeting and enter the meeting ID.

Meeting ID: 496 742 494