Kashyap, Rajiv K., and Easwar S. Iyer. "Who Are Socially Responsible Investors?" Working Paper, University of Massachusetts, Amherst, 2006.

Surveys 216 investors to "develop a profile of an investor in [socially responsible mutual funds] and compare it with that of the 'average' investor." Using a seven-point Likert scale survey (1=Strong Disagree, 7=Strongly Agree, etc.) the study examines which factors are most important in investors' decisions to incorporate social and environmental values into their investment processes.

People likely to be social investors are identified by their responses to to three questions about their goals and objectives (e.g., "I never invest in firms I deem as 'bad' for society"). These respondents are then compared with those who did not self-identify as socially responsible.

Social investors are shown to have virtually identical levels of materialism (as measured by responses to eight questions), and attitudes toward risk (six questions). Unsurprisingly, social investors were more religious and had greater concern about the environment than did their non-SRI counterparts. But they also tested much higher for desired social impact (termed 'investment efficacy'), e.g., "I want my investments to enhance society's welfare."

Although the sample size is small and the authors characterize the work as exploratory, this is the first independent empirical work we have seen on the motivations of social investors in many years. The finding on social impact is particularly noteworthy. As this is written (August 2006) we can argue with good empirical support that most social investors can earn competitive returns, given appropriate portfolio management (risk control and portfolio optimization).

But the question of whether social investing as it is currently practiced has tangible positive impacts on society has been little-studied. Given the importance investors attach to social impact, perhaps that should change.