Does the market value impact investing and socially responsible investing?

This study investigates whether the market values impact investing (II, “doing good”) and socially responsible investing (SRI, “not doing bad”) strategies differently by examining the relationship between stock performance of different time horizons and sustainability strengths and concerns using a system of linear equations approach, after controlling for economic sustainability. We show the the negative effect of II has longer horizon effect than the positive effect of SRI strategy on stock returns. Additional tests show that the relationship between stock performance and economic (non-financial) sustainability performance is weakening (strengthening) over time. We also find that the relationship between stock returns and corporate investment strategies depends on resources availability and level of institutional ownership. Results provide policy, practical and research implications by promoting II and SRI investment strategies in generating economic return on investment for shareholders while achieving social and environmental impacts.