We model investors that take into account the amount of public good that firms produce (e.g., by reducing carbon emissions) when making their portfolio allocation. In an equilibrium asset pricing model with production and public goods provision, we find that environmentally conscious investors...

The rise of sustainable investing comes coupled with the question of what impact it has. We assume that firms can contribute to the public good, e.g., by reducing carbon emissions, and investors may take into account the amount of public good that firms produce when making their investment...