Investors as Stewards of the Commons?

Journal of Applied Corporate Finance 30 (2), Spring 2018

38 Pages Posted: 8 Aug 2017 Last revised: 24 May 2018

Date Written: August 7, 2017


Over the past few years, there has been a significant increase in the number of initiatives seeking to mobilize investor voice towards positive social impact. In this paper, I provide a framework outlining the role of investors as stewards of the commons. While companies are increasingly addressing environmental and social issues that also improve their economic value, for some of these issues individual company action is costly. At the same time, for a further subset of those issues, company action coupled with collaboration between companies is value enhancing. However, collaboration between companies is notoriously difficult and fragile requiring commitment mechanisms. I suggest that a small set of large institutional investors, importantly, but not exclusively, index and quasi-index investors, could provide this commitment mechanism. Common ownership of competitors within industries and long-time horizons in ownership of shares are key characteristics for investors that could act as stewards of the commons. Social pressure fueled by socially responsible investment funds and non-profit organizations and customer pressure from individual investors are critical in mitigating free-rider problems among asset managers and sustaining engagement practices. Finally, I explore the limits and anticompetitive concerns to the theory of change presented here.

Keywords: stewardship, engagement, governance, sustainability, environment, inclusion, inequality, social change, investors

JEL Classification: M14, M20, M41, G32, G34

Suggested Citation

Serafeim, George, Investors as Stewards of the Commons? (August 7, 2017). Journal of Applied Corporate Finance 30 (2), Spring 2018, Available at SSRN: or

George Serafeim (Contact Author)

Harvard Business School ( email )

Boston, MA 02163
United States


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