A Framework for Investing with Altruism

Abstract

I propose and develop a framework for the financial economic analysis of investing with altruistic preferences. A key part of the framework is the precise definition of different forms of impact and, in particular, investor impact. This has several practical implications including that investor impact is not a measurable, rival good but rather a decision-making tool that should be carefully and independently assessed by each investor. I also introduce the concept of total portfolio returns, which capture all effects relevant to an investor's mission including financial, impact, and strategic returns and mission-correlated premia. The adaptability and coherence of this framework makes it suitable for both further research and practical applications.