A hybrid framework for social and financial investment decisions

Abstract

Corporate managers need to constantly weight the interests of the firm's stakeholders (financers, employees, consumers) when making investment decisions. In recent years there have been growing preference from such stakeholders to address, with personal resources, the various market failures that lead to the unsustainable depletion of natural resources and degradation of social outcomes. To accommodate for these preferences, this study proposes a theoretical framework to be used by such managers to inform their investment decision making. It incorporates discussion on the motivations for managers to embrace such change in mindset. As well as it proposes a framework, to compare investment decisions quantitatively. The framework discusses incorporates discussion on how to generate financial value from initiatives that directly improve environmental sustainability and social outcomes. As well as it incorporates discussion on how to incorporate, into those financial investment decisions, measures of environmental and social externalities created by individual investments.