Simon research challenges assumptions about responsible investing.

New research reveals how well-intended investment strategies can delay real environmental progress.

When it comes to the future of business, Simon Business School continues to push conversations and lead thought. Sometimes this research explores areas where good intentions and real-world incentives collide.

A recent study coauthored by Alexandr Kopytov, assistant professor of finance at Simon Business School, is a prime example. The research, conducted with faculty from Johns Hopkins University and the Stockholm School of Economics, takes a closer look at how socially responsible investing (SRI) affects the timing of environmental reforms within companies. And the findings are not what many expect.

“It’s surprising at first,” Kopytov says, “but when you think about this from the correct angle, it makes sense.”

The team’s model shows that investors who aim to drive positive change may inadvertently encourage firms to wait before becoming greener—hoping to attract a purpose-driven buyer willing to pay a premium because the company remains “dirty.” Managers understand this motivation, Kopytov explains, which can create “an incentive for firms to delay doing good themselves.”

This kind of insight exemplifies how Simon faculty excel at uncovering the ways thoughtful design and redesigned incentives can influence behavior in complex markets.
Kopytov notes that strategic commitments from socially responsible investors could shift the dynamic. If investors publicly promise to reward companies after reforms are completed, firms have clearer reasons to act sooner. “If they can commit to such a mandate,” he says, “managers would reform earlier in order to earn that premium.”

The broader takeaway? Even well-intended investment strategies require rigorous analysis to ensure they truly drive impact.

This research reflects Simon’s distinct lens on business—one grounded in data, driven by economics, and aimed at solving today’s pressing challenges with clarity.

Read the full, in-depth story from the University of Rochester News Center to explore the study’s methodology, implications for investors, and what it means for the future of sustainable finance.