Socially Responsible Investing

Purpose This study aims to answer the question, “Are people willing to forgo a portion of financial return for social good?” In other words, this study sought to report whether investors would be willing to accept less return, if the invested money could achieve a desired socially‐driven outcome. Methods An experiment was conducted at the Wharton Behavioral Lab, asking participants to make a tradeoff decision between lower paying and socially responsible option and higher paying and socially irresponsible option. Participants received payment based on their decisions. Results Fifty‐two people participated in the experiment over the course of three separate rounds. Findings can be organized into three points: 1.) Higher percentage of return results in the greater number of invested tokens; 2.) Women are more likely to allocate more tokens into the socially responsible option than men; and 3.) People behave differently according to the order of options presented. Conclusions Investors interested in socially responsible investing do not necessarily expect to sacrifice a portion of their gains. Thus, to encourage socially responsible investing, its returns should be comparable to returns for conventional investing.