Journal of Finance 2026

Externalities of Responsible Investments

MICHELE BISCEGLIA¹; Alessio Piccolo¹; Jan Schneemeier²

¹ Indiana University , Kelley School of Business. Jan Schneemeier is at · ² Michele Bisceglia is at Harvard Business School. Alessio Piccolo is at Indiana University, Kelley School of Business. Jan Schneemeier is at Michigan State University, Broad College of Business. We are indebted to Editor Thomas Philippon, an Associate Editor, and two anonymous referees. We thank Rui

Abstract

We develop a model to study the efficiency of socially responsible investing (SRI) as a mechanism to control firms' externalities. When SRI is not too popular, responsible investors favor strategies that lead to a concentration of SRI in a subset of firms in the economy. This concentration can mitigate coordination issues in adopting green technologies, but it can also crowd out the green investments of excluded firms and increase the price of green products. In equilibrium, responsible investors continue to favor concentration even as SRI becomes more popular, and concentrate the most when concentration is least desirable.

DOI

10.1111/jofi.70082

Language

en

Sources

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APA 7 MLA 9 Chicago (author–date) Harvard Elsevier Harvard (JFE, JBF…) The Accounting Review Academy of Management American Marketing Association INFORMS (Management Science) Copy citation Copied ✓