Socially Responsible Investment and Pro-social Change

Martha Starr ()

No 2007-23, Working Papers from American University, Department of Economics

Abstract: Socially responsible investment (SRI) refers to investing in companies based on financial and social performance, where the latter includes such concerns as the environment, sweatshop labor, and animal testing. This paper argues that SRI strongly resembles pro-social behaviors and social dynamics found in experimental settings. The role of fairness-related sanctioning is emphasized, wherein companies that treat their various stakeholders “fairly” are screened into SRI portfolios, while those treating them poorly are screened out. It is argued that, because SRI creates opportunities for businesses to thrive relative to their competitors by improving social performance, it creates some scope for pro-social change. Still, the magnitude of changes that can be expected from voluntary changes in business behavior remains to be determined.

Keywords: Social responsibility; pro-social behavior; fairness; investment decisions; corporate culture (search for similar items in EconPapers)
JEL-codes: D63 D64 G11 M14 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2007-11
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https://doi.org/10.17606/7pm8-nq62 First version, 2007 (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:amu:wpaper:200723

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