On average, investors are willing to forgo some monetary gains in order to promote social interests but one third have a strong preference for maximizing monetary gains, and are unwilling to forgo even very small amounts to advance any social goals.
Scott Hirst, Associate Professor, Boston University School of Law; Kobi Kastiel, Associate Professor, Buchmann Faculty of Law, Tel Aviv University; Senior Fellow and Lecturer on Law, Harvard Law School; and Tamar Kricheli-Katz and Professor of Law, Buchmann Faculty of Law, Tel Aviv University conducted an experiment on 279 Americans that involved real monetary gains for participants.
The researchers designed an experiment to investigate the tradeoffs that individuals make between their financial interests and four different social interests—gender diversity, income equality, environmental protection, and faith-based values.
In a paper published in October 2022, “How much do investors care about social responsibility ?”, they concluded that, on average, individuals were willing to forgo between $176 and $253 out of returns of $1,000 on a $10,000 investment (corresponding to returns of between 1.76% and 2.53%, out of a potential total return of 10%), to promote social interests.
Environmental protection was the cause participants cared about most according to the research, with maximum potential willingness-to- forgo amounts that were significantly higher than those for gender diversity and faith-based values. The authors said this result is consistent with the view that individuals seem to forgo more profits for promoting social causes when it comes to damages that firms have a comparative advantage at undoing, such as pollution.
The paper added: “Whereas most investors are willing to forgo gains to promote social interests, a significant percentage of investors (32% in our study) have a strong preference for maximizing monetary gains, and are unwilling to forgo even very small amounts to advance any social goals.”
These investors were unwilling to forgo $10 out of $1,000, (or a 0.1% return out of the 10% potential return) to advance any of the four social goals.
The report said individuals identifying as Democrats and women, and those with greater income, are more willing to forgo, and to forgo greater amounts, to promote social causes, compared to those identifying as Republicans or independents and men, and those with lower incomes.
“Together these findings suggest that there is no clear consensus among investors that corporations should, or should not, promote social causes at the expense of their financial gains,” said the paper. “More than anything, the split in investors’ social preferences that we observe is a reflection of a political divide between individuals who support relatively progressive causes and those who support more conservative causes.”
