On the neutrality of socially responsible investing

Lutz G. Arnold ()
Additional contact information
Lutz G. Arnold: Department of Economics, University of Regensburg

Theoretical Economics, 2023, vol. 18, issue 1

Abstract: This paper investigates the conditions under which socially responsible investment (SRI) is neutral from the viewpoint of general equilibrium theory. Three conditions are jointly sufficient for neutrality of SRI. First, the financial market is complete and SRI does not compromise the spanning opportunities it provides. Second, consumers' rankings of consumption bundles are unaffected by their asset holdings. Third, firms maximize shareholder value. Under an additional assumption that is satisfied, e.g., if SRI takes the form of negative screening, the taxes and transfers needed to implement a Pareto-optimal allocation are the same as in the absence of SRI. SRI is neutral despite financial market incompleteness if there are perfect substitutes for targeted stocks.

Keywords: Socially responsible investing; general equilibrium; market incompleteness (search for similar items in EconPapers)
JEL-codes: D51 D52 D53 G13 M14 (search for similar items in EconPapers)
Date: 2023-01-18
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://econtheory.org/ojs/index.php/te/article/viewFile/20230065/35726/1058 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:the:publsh:4719

Access Statistics for this article

Theoretical Economics is currently edited by Simon Board, Todd D. Sarver, Juuso Toikka, Rakesh Vohra, Pierre-Olivier Weill

More articles in Theoretical Economics from Econometric Society
Bibliographic data for series maintained by Martin J. Osborne ().