Pricing Investor Impact

I develop a model of capital markets with heterogeneous firms and investors and a public good. Investors with concern for the public good develop endogenous portfolio tilts. These tilts depend on the degree to which an investment counterfactually contributes to the public good, and the price each investor is willing to pay for this contribution. I apply the model to estimate the price of investor impact implied by observed ESG portfolio tilts. Adjusted for the expected investor contribution, the implied price of impact for ESG scores is an order of magnitude or more greater than the prices suggested by known social and charitable costs. This tension highlights important questions for both research and practice