Deqiu Chen, University of International Business and Economics
Haoyuan Li, University of International Business and Economics
Yujing Ma, Hong Kong Polytechnic University
Roni Michaely, University of Hong Kong
Abstract: We provide comprehensive evidence on how analysts evaluate corporate environmental practices. Combining a survey of 505 analysts with textual analysis of 273,664 reports, we find that analysts routinely cover environmental issues and price these dynamics. Although analysts recognize physical and regulatory risks, particularly for high-polluting industries, they more frequently emphasize environmental-related opportunities like green technology transitions. Analysts embed these views into earnings forecasts and recommendations. Most analysts approach environmental issues exclusively through financial value, while a nontrivial minority also consider broader societal values. Finally, analysts identify regulation and public scrutiny, not investor pressure, as primary catalysts for corporate environmental improvement.
Discussant: Paul Décaire, Arizona State University
Abstract: We develop a dynamic model of socially responsible investment where large householdstrade firm equity and vote on production decisions involving the depletion ofa nonrenewable resource. Although accumulating wealth and exercising voice areintratemporal substitutes, they are dynamic complements because influence is tiedto wealth. Socially responsible households delay implementing resource-preservingpolicies that reduce firm productivity to amass wealth for future influence, whilefinancially-motivated households may accumulate wealth to block conservation efforts.The constrained efficient technological choice balances higher productivity withsociety’s willingness to pay for conservation, and can be implemented through a votingprotocol that assigns voice based on how depletion impacts welfare rather thanshareholdings.
Abstract: This paper studies how ethical capital coordinates to reduce corporate externalities. I develop a general-equilibrium model of portfolio choice and shareholder influence that separates what investors value from how they reason under strategic interdependence. The paper introduces a Nash-Kant mixed equilibrium in which heterogeneous reasoning and coordination technology, rather than preferences alone, determine equilibrium ownership and externality levels. I test the model's predictions on a global panel of mutual funds and ETFs, and show that a fund's moral instrument---engagement versus exclusion---predicts its response to coordination shocks. IV estimates suggest that engagement-oriented ownership reduces subsequent firm-level emissions intensity.
Discussant: Jan Schneemeier, Michigan State University
