Lecture 15: Prosociality and SRI. Flashcards
(15 cards)
What are social preferences?
Preferences where individuals care not only about their own outcomes but also about fairness, altruism, or others’ payoffs.
Why are social preferences relevant in finance?
They influence investment decisions, ethical behavior, and demand for sustainable financial products.
What is prosocial behavior?
Voluntary actions intended to benefit others, such as sharing, donating, or ethical investing.
Name five explanations for prosocial behavior.
- Inequality aversion
- Self-image concerns
- Social image concerns
- Warm glow
- Norm compliance
What is inequality aversion?
Disliking unequal outcomes, even when personally beneficial.
What is “warm glow” giving?
Donating or doing good to feel good internally.
What is the role of norms in prosocial behavior?
People act in socially appropriate ways based on shared norms, even without external enforcement.
What did Fischbacher & Föllmi-Heusi (2013) find about lying?
People often lie partially to maintain a positive self-image — revealing complex moral trade-offs.
How does prosociality affect financial professionals?
Bankers primed with professional identity reported more dishonest outcomes, suggesting norm suppression.
What is socially responsible investing (SRI)?
Allocating capital based on environmental, social, or governance (ESG) concerns — often at the cost of expected returns.
What did Bauer, Ruof & Smeets (2021) find about SRI?
Many investors choose sustainable funds even if they expect lower returns — especially those with non-consequentialist motives.
What is the difference between consequentialist and non-consequentialist investors?
Consequentialist: Focus on actual social impact
Non-consequentialist: Care about the act of investing ethically itself.
Can SRI have unintended consequences?
Yes — avoiding ‘brown’ firms may reduce activist influence and allow harmful behavior to persist.
What is mission hedging?
Investing in harmful industries to ensure funding during times when those harms increase — a strategic form of SRI.
What does the Schneider, Brun & Weber (2025) study suggest about job selection?
People avoid immoral jobs even when they pay more — unless they can reduce harm, revealing strong ethical preferences.
