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A leading asset management firm in India is offering a mutual fund from which the dividend income will be donated on the investors' behalf to the Indian Cancer Society. Such donation is, indeed, a good cause. But why should social causes be combined with investments? Take the consumer goods market. Why do you want to buy a high-end phone if you can buy a cheap one for Rs 2,000?
Value-expressive features
We buy products not just for their utility but also for what behavioural psychologists term ‘value-expressive features'. A high-end mobile phone indicates that you are successful. And perception of success begets success! It is possible that you get more business because you are perceived as successful.
People buy high-end phones, luxury cars and yachts for such value-expressive features. We display such behaviour in our dining habits as well when we visit expensive restaurants even though we can dine similar meal for one-tenth of the price.
Investments are no different. We need high risk-adjusted returns but we care about value-expressive features as well. Private banking, for instance, offers high-end custom-tailored solutions to select individuals. And you feel good paying to be a private banking client, as it displays your status in the society.
Socially responsible investment
Sometimes, you may engage in such actions for self-signalling. After the 9/11 attack, the Treasury Department issued “Patriot Bonds”. And it sold well, as Americans expressed their solidarity to their country. Investments which offer utilitarian (return) and value-expressive features are part of Socially Responsible Investment (SRI). You may prefer not to invest in sin stocks such as tobacco and alcohol. And you may prefer firms that promote sustainable development such as those adopting clean technologies. Or investments that help the needy or support a health cause. It will be interesting to see how Indian investors react to such SRI products.
(The author is the founder of Navera Consulting. He can be reached at >enhancek@gmail.com )
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