Abstract Government-provided flood insurance contracts have strict coverage limits, leaving some households underinsured against flood risk. This paper exploits these strict coverage limits as well as staggered flood map updates to show that mortgage lenders screen for uninsurable flood risk by requiring lower loan-to-value ratios at origination. This credit rationing leads delinquency rates to equalize inside and outside of flood zones, and shifts the composition of mortgage borrowers in flood zones toward richer and higher credit quality individuals. I conclude that lenders reduce credit supply when they retain residual uninsured exposures to flood risk, which has distributional consequences for flood zones.

We characterize investors’ moral preferences in a parsimonious experimental setting, where we auction stocks with various ethical features. We find strong evidence that investors seek to align their investments with their social values (“value alignment”), and find no evidence of behavior driven by the social impact of investment decisions (“impact-seeking preferences”). First, the willingness to pay (WTP) for a stock is an increasing and quasi-linear function of corporate externalities. Second, this WTP does not change when corporate externalities are made contingent on investors buying the auctioned stock. Our results are thus compatible with a utility-maximization model where non-pecuniary benefits of firms’ externalities only accrue through stock ownership, not through the actual impact of investment decisions. Finally, the ability to directly contribute to the externality (by donating) does not reduce the willingness to pay for virtuous stocks.