The Pace of Change: Socially Responsible Investing in Private Markets

123 Pages Posted: 2 Aug 2021 Last revised: 29 Feb 2024

See all articles by Deeksha Gupta

Deeksha Gupta

Johns Hopkins University

Alexandr Kopytov

University of Rochester - Simon Business School

Jan Starmans

Department of Finance, Stockholm School of Economics

Date Written: February 27, 2024

Abstract

We study the pace at which socially responsible investors generate impact in private capital markets. Investors with broad pro-social preferences care about firm externalities independent of their ownership in the firm and hence value acquiring firms with high negative production externalities because they can reform these firms. The anticipation of trading gains for firms with high negative externalities decreases the incentive of current firm owners to reduce these externalities proactively, potentially causing delay in reform. Investment mandates through which investors can commit to paying a premium for firms with low negative externalities can incentivize reform in a timely manner.

Keywords: Socially responsible investing, impact investing, ESG, private markets.

JEL Classification: G11, G23, G24, G32, G34, H41, M14.

Suggested Citation

Gupta, Deeksha and Kopytov, Alexandr and Starmans, Jan, The Pace of Change: Socially Responsible Investing in Private Markets (February 27, 2024). Available at SSRN: https://ssrn.com/abstract=3896511 or http://dx.doi.org/10.2139/ssrn.3896511

Deeksha Gupta

Johns Hopkins University ( email )

Baltimore, MD 20036-1984
United States

Alexandr Kopytov

University of Rochester - Simon Business School ( email )

Rochester, NY 14627
United States

Jan Starmans (Contact Author)

Department of Finance, Stockholm School of Economics ( email )

+46 8 736 9181 (Phone)

HOME PAGE: http://sites.google.com/site/janstarmans11/

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