Corporations increasingly undertake and disclose policies that target social issues like poverty and racism. Theoretically, firms should not implement policies if they have no comparative advantage in executing them — such policies are called separable because their implementation can be easily separated from the regular business of the firm.
Using micro-level data, we examine the behavior of socially responsible investment (SRI) funds. SRI funds select firms with lower pollution, more board diversity, higher employee satisfaction, and better workplace safety.