16:30 The Impact of Social Investments on Charitable Donations
Shai Danziger, Tel-Aviv University
Promising financial returns and social benefits, socially responsible funds have garnered significant investor demand, with worldwide assets exceeding $30.68 trillion in 2018. By contrast, charitable giving by individuals, the traditional avenue for achieving societal impact, declined by 1.1% in the U.S. in 2018 to an estimated $292.09 billion. These macro trends could indicate a shift in individuals’ preference for funding social action. We examine the relationship between social investing and charitable donations using a unique dataset that consists of actual donation transactions and investment behaviors to test the change in investors’ donations after their investment firm introduced a social fund. We find that investors switching to the social fund reduced their donations by 16.8% of the investment amount, and the decrease occurred mainly in charities supporting the same causes as the social fund. However, 79% of investors did not donate before switching, so the social fund attracted more people to fund social causes. Still, due to the substitution effect, we estimate social funds have a positive effect on society only if their annual contributions to social causes are more than 4.4% of the balance invested.