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Principle Guided Investing: The Use of Exclusionary Screens and Its Implications for Green Investors


This paper examines how “green” investors can induce firms to invest in clean production technology. The 1-period model incorporates heterogeneous agents — Markowitz investors and green investors — and two groups of firms working either with clean or polluting technology. Since green investors apply exclusionary environmental screens, some firms will invest in abatement technology in order to switch to a clean technology and thereby raising firm value. The number of firms working with clean technology will be larger, the higher the proportion of green investors, the lower costs of abatement technology, the higher diversification benefits of stocks of clean firms and if positive spill-overs for clean firms exist.


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Correspondence to Urs von Arx.

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The author thanks Lucas Bretschger, Hannes Egli, Gay Saxby from the Center of Economic Research, ETH Zürich, Andreas Schäfer from the Center of Corporate Responsibility and Sustainability, University of Zürich, and an anonymous referee for many valuable comments and helpful suggestions.

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Open Access This article is distributed under the terms of the Creative Commons Attribution 2.0 International License ( ), which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.

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von Arx, U. Principle Guided Investing: The Use of Exclusionary Screens and Its Implications for Green Investors. Swiss J Economics Statistics 143, 3–30 (2007).

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