We show that social preferences do not drive sustainable investing (SI) by examining
the response of SI flows to exogenous shocks that activate pro-social motives. Our design
capitalizes on the inherently social nature of philanthropy to identify which shocks genuinely
activate social preferences and then tests whether these same shocks also affect SI flows. A set of
environmental shocks trigger social preferences, as evidenced by a significant effect on granular
US charity flows, but do not elicit a response in SI. A negative shock to the tax shield benefits of
philanthropy results in outflows in charitable donations but these are not redirected towards SI as
might be anticipated if both avenues serve to fulfil social preferences. Our tests are very strict in
the sense that we define treated and control charities and SI funds based on their detailed
classification and style. We offer additional supporting evidence by performing event studies on
SI fund net asset values. Furthermore, we address several alternative explanations, including
considerations of reputation, risk-return effects, and institutional and informational differences
between SI and philanthropy. Whilst we do not observe a market-wide effect, our analysis based
in the US Federal Reserve Survey of Consumer Finance reveals transfers between philanthropy
and SI among Millennials. The absence of a market-wide effect may be attributed to the relatively
small proportion of capital flows generated by the demographic group most interested in SI. We
show that our findings also hold in the UK. Policy makers considering higher ESG mandates
should recognise that appealing to social preferences may be less effective than risk/return-based
incentives in redirecting investment flows.