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The purpose of this paper is to extend our understanding of corporate governance, social issues and capital markets by distinguishing between the socially responsible investing phenomenon and mainstream investing with respect to social issues. It attempts to clarify the domain by casting it in the theoretical frame of prospect theory and mental modeling. With a qualitative study done among large institutional investors in the Canadian securities industry, the article derives a proposed mental model of these institutional investors' cognitive model of social issues as they impact investments.

The institutional investors in this study know exactly where value is derived from social investments suggesting that there may be more alignment between directors, investors and societal expectations than has been previously suggested.

The limited number of organizations …