The Department of Finance and FRIC, Center for Financial Frictions, are proud to announce the upcoming seminar with Martin Oehmke, London School of Economics.
Martin Oehmke will present:
A Theory of Socially Responsible Investment
Based on a canonical model of corporate ﬁnancing under agency frictions, we characterize how and when socially responsible investors can aﬀect ﬁrm behavior and derive an investment criterion, the social proﬁtability index (SPI), to guide scarce socially responsible capital. The SPI highlights the importance of counter-factual social costs that would arise in the absence of socially responsible investors. Accordingly, most existing ESG metrics are not suited to guide investment decisions. Our model also uncovers a complementarity between ﬁnancial capital and socially responsible capital: The presence of ﬁnancial investors without regard for externalities can raise welfare relative to a setting with only socially responsible investors.
Solbjerg Plads 3,