It seems like you are fairly confident from your research that impact investing will tend to have little impact in publicly traded markets. I briefly looked into the theoretical literature on this, and I’m not seeing why we should be so confident in that idea. For example, this paper from 2019 claims:
“In general, systematic screening of assets based on investors’ preferences leads to a return premium on the screened assets, in equilibrium, and such return differences cannot be arbitraged away by ‘neutral’ investors”.
They then cite four theoretical papers in support of that claim (note: I haven’t actually read through these papers. I just glanced at the introductions and the setups of their models. It could be that these are bad papers).
Were you aware of this literature when writing your report? Why should we be so confident in the arbitrage argument?
Hi, Thanks for this. There seems to be agreement that demand curves are perfectly elastic on the 6 month timeframe. I looked at the paper you sent and it doesn’ present any of its own evidence but cites some other papers, which I don’t have time to look at. Our report on impact investing goes into this in more detail.
You’re right that the paper I posted doesn’t present direct evidence. I just thought it was important that in their literature review they claim that prior studies show that demand curves are not perfectly elastic (at least in theory. They aren’t citing empirical papers).
On the empirical side, I’m surprised to hear you say that there seems to be agreement that long-run demand curves are perfectly elastic. On page 18 of the founder’s pledge report, you seem to say that there is expert disagreement on this, and you cite multiple recent studies on both sides of the issue. Has more evidence come out since the report was published?
It seems like you are fairly confident from your research that impact investing will tend to have little impact in publicly traded markets. I briefly looked into the theoretical literature on this, and I’m not seeing why we should be so confident in that idea. For example, this paper from 2019 claims:
They then cite four theoretical papers in support of that claim (note: I haven’t actually read through these papers. I just glanced at the introductions and the setups of their models. It could be that these are bad papers).
Were you aware of this literature when writing your report? Why should we be so confident in the arbitrage argument?
Hi, Thanks for this. There seems to be agreement that demand curves are perfectly elastic on the 6 month timeframe. I looked at the paper you sent and it doesn’ present any of its own evidence but cites some other papers, which I don’t have time to look at. Our report on impact investing goes into this in more detail.
Thanks for the reply.
You’re right that the paper I posted doesn’t present direct evidence. I just thought it was important that in their literature review they claim that prior studies show that demand curves are not perfectly elastic (at least in theory. They aren’t citing empirical papers).
On the empirical side, I’m surprised to hear you say that there seems to be agreement that long-run demand curves are perfectly elastic. On page 18 of the founder’s pledge report, you seem to say that there is expert disagreement on this, and you cite multiple recent studies on both sides of the issue. Has more evidence come out since the report was published?