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Responsible Investment and Responsible Consumption

Author

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  • Hendrik Hakenes
  • Eva Schliephake

Abstract

To reduce a negative externality, socially responsible households can invest respon- sibly (SRI), consume responsibly (SRC), or do both. Which is better? In a closed microeconomic model with intertwined product and capital markets, we analyze how responsible households should use SRI and SRC to maximize their impact. Both strategies reduce the externality as long as investors are risk-averse and the products have no perfect substitutes. Responsible households gain the highest impact when using SRC in equal proportion to SRI. A mere focus on SRC is never efficient. SRI plays a role in any green strategy. The financial performance of green investments is determined by the responsible households' mix between SRI and SRC.

Suggested Citation

  • Hendrik Hakenes & Eva Schliephake, 2022. "Responsible Investment and Responsible Consumption," CRC TR 224 Discussion Paper Series crctr224_2022_330, University of Bonn and University of Mannheim, Germany.
    • Handle: RePEc:bon:boncrc:crctr224_2022_330
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    File URL: https://www.crctr224.de/research/discussion-papers/archive/dp330
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    More about this item

    Keywords

    Socially responsible investment (SRI); ethical investment; socially responsible consumption (SRC); sustainable investment; sustainable consumption; green investment; divestment; ESG; SPI;
    All these keywords.

    JEL classification:

    • D16 - Microeconomics - - Household Behavior - - - Collaborative Consumption
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • D64 - Microeconomics - - Welfare Economics - - - Altruism; Philanthropy; Intergenerational Transfers
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility

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