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PreprintCited by 197Corporate Social Responsibility ReportingFinancial Markets and Investment StrategiesSustainable Finance and Green Bonds

The Impact of Impact Investing

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Berk, Jonathan B., van Binsbergen, Jules H.·2021·SSRN Electronic Journal
DOI 10.2139/ssrn.3909166
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Abstract

The change in the cost of capital that results from a divestiture strategy can be closely approximated as a simple function of three parameters: (1) the fraction of socially conscious capital, (2) the fraction of targeted firms in the economy and (3) the return correlation between the targeted firms and the rest of the stock market. When calibrated to current data, we demonstrate that the impact on the cost of capital is too small to meaningfully affect real investment decisions. We empirically corroborate these small estimates by studying firm changes in ESG status and are unable to detect an impact of ESG divestiture strategies on cost of capital of treated firms. Our results suggest that to have impact, instead of divesting, socially conscious investors should invest and exercise their rights of control to change corporate policy.

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  • Berk and van Binsbergen (2021) argue that ESG divestiture strategies have little impact on the real investment decision of the affected firms.

    “Berk and van Binsbergen (2021) argue that ESG divestiture strategies have little impact on the real investment decision of the affected firms.”

    From A review on ESG investing: Investors' expectations, beliefs and perceptions (2024) · cites this paper as Berk and van Binsbergen (2021)

  • Recent empirical studies caution against the effectiveness of divestment in generating the intended impact.

    “However, recent empirical studies caution against its effectiveness in generating the intended impact.”

    From A review on ESG investing: Investors' expectations, beliefs and perceptions (2024) · cites this paper as Berk and van Binsbergen (2021)

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Authors
Berk, J. B., & van Binsbergen, J. H.
Affiliations
National Bureau of Economic Research (US)
Corresponding author
Berk, Jonathan B.
ORCID
Berk, Jonathan B.
Venue
SSRN Electronic Journal
Publisher
Elsevier BV
Published
2021
ISSN
1556-5068 (ISSN-L)
DOI
10.2139/ssrn.3909166
OpenAlex
W3198722432
Cited by
197
References
6
Citations by year
2026: 7 · 2025: 20 · 2024: 61 · 2023: 59 · 2022: 35 · 2021: 7 · 2020: 5 · 2019: 2 · 2018: 1
Type
posted content
Language
en
Open access
Locations
  • SSRN Electronic Journal (acceptedVersion)
  • RePEc: Research Papers in Economics (submittedVersion)
Topics
  • Social Sciences › Business, Management and Accounting › Strategy and Management › Corporate Social Responsibility Reporting
  • Social Sciences › Economics, Econometrics and Finance › Finance › Financial Markets and Investment Strategies
  • Social Sciences › Economics, Econometrics and Finance › Finance › Sustainable Finance and Green Bonds
Keywords
impact investing, divestiture, cost of capital, corporate governance, shareholder rights, socially responsible investment

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