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Universal Investors and Socially Responsible Investors: a tale of emerging affinities

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  • Steven Lydenberg
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    Abstract

    This paper posits three types of investors in today's financial markets: Universal Investors, Social Investors and Rational Investors. It argues that the Universal and Social Investor are theoretically inclined to seek returns that benefit society and the environment as a whole, while the tenets of modern portfolio theory lead the Rational Investor to seek returns based primarily on market price. Because of the dominance of modern portfolio theory, the actual practices of the Universal and Social Investor reproduce those of the Rational Investor in most regards today. However, Universal and Social Investors are now pioneering at least three investment practices that promote returns to the economy and society. These are engagement with corporate management, investments that benefit underserved communities, and the setting of social and environmental standards in selecting investments. These practices differ from those of the mainstream in that they deliberately take into account more than market price in seeking returns on investments. Copyright (c) 2007 The Author; Journal compilation (c) 2007 Blackwell Publishing Ltd.

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    Bibliographic Info

    Article provided by Wiley Blackwell in its journal Corporate Governance: An International Review.

    Volume (Year): 15 (2007)
    Issue (Month): 3 (05)
    Pages: 467-477

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    Handle: RePEc:bla:corgov:v:15:y:2007:i:3:p:467-477

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