A growing number of investors are attempting to create social value with their investments, but it’s often more difficult to achieve than one might think.
The vast majority of investors throughout the world have a single goal: to earn the highest financial return. These socially-neutral investors only want to maximize their risk-adjusted returns and would not accept a lower financial return from a socially beneficial investment. An increasing number of socially-motivated investors have other goals besides maximizing profits. They seek to align their investments with their social values (value alignment) and, where possible, to enable the companies in which they invest to create more social value (social value creation).
The thrust of this article is that, while it is relatively easy to achieve value alignment, actually creating social value is far more difficult.
Socially motivated investors who seek value alignment would prefer to own stocks only in companies that act in accordance with their moral or social values. Independent of having any effect on the company’s behavior, these investors may wish to affirmatively express their identities by owning stock in what they deem to be a good company, or to avoid “dirty hands” or complicity by refusing to own stock in what they deem to be a bad company.