Social Responsibility, Consequentialism and Public Policy

The paper investigates socially responsible investment (SRI) when savers’ moral compass is direct consequentialism. It unveils the determinants of the (positive) green premium under laissez-faire and studies the ability of Pigouvian taxes to deliver the first-best outcome. It characterizes conditions under which, despite leakage, divestment increases social welfare. It describes when best-in-class strategies dominate exclusion. It further demonstrates that, whenever a polluting technology may be cleaned, shareholder activism in the polluting sector may be the morally right action. The paper then conducts the same analysis with two other moral criteria: "shared responsibility" and rule consequentialism, and compares their implications to the ones of direct consequentialism.