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The Pace of Change: Socially Responsible Investing in Private Markets

Author

Listed:
  • Deeksha Gupta
  • Alexandr Kopytov
  • Jan Starmans

Abstract

We show that socially responsible investors can have a negative impact by slowing the pace of firm reform. Investors with broad prosocial preferences value acquiring dirty firms with high negative production externalities because they can reform these firms. The anticipation of trading gains for dirty firms decreases the incentive of current firm owners to reduce externalities proactively, potentially causing delay in reform. The presence of financial investors—alongside socially responsible investors—can exacerbate delay. Investment mandates through which socially responsible investors commit to paying a premium for green firms can incentivize reform in a timely manner.

Suggested Citation

  • Deeksha Gupta & Alexandr Kopytov & Jan Starmans, 2026. "The Pace of Change: Socially Responsible Investing in Private Markets," The Review of Financial Studies, Society for Financial Studies, vol. 39(1), pages 30-78.
    • Handle: RePEc:oup:rfinst:v:39:y:2026:i:1:p:30-78.
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    File URL: http://hdl.handle.net/10.1093/rfs/hhaf083
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    Keywords

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    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility

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