Why do investors hold socially responsible mutual funds?
- Published in Journal of Finance
- Sustainable & Impact Investing
The paper “Why do investors hold socially responsible mutual funds?” by Paul Smeets and Arno Riedl of Maastricht University has been accepted for publication in the Journal of Finance.
To understand why investors hold socially responsible (SRI) mutual funds, we use administrative data and link them to survey responses and behavior in incentivized experiments. We find that both social preferences and social signaling are important factors for SRI decisions. Financial motives also play a role but appear to be of limited importance. Socially responsible investors in our sample expect to earn lower returns on SRI than on conventional funds and pay higher management fees. This suggests that investors are willing to forgo financial performance in order to invest in accordance with their social preferences.