The equity lending supply of brown firms is concentrated in one-fourth of mutual fund shareholders, two-thirds of which are passive. I construct a novel dataset of passive fund equity lending spanning 2010 to 2024 to document the securities lending channel of sustainable investing. Pro-environmental lenders (PELs) tilt their lending supply toward brown positions, facilitating short selling as a market-based governance mechanism that disciplines brown firms. Consistent with non-pecuniary motives, PELs are predominantly managed by politically liberal managers and UNPRI signatories. PELs do not forgo voice: they recall brown shares when shareholder meetings feature E&S proposals and vote in favor. At the firm level, PEL ownership relaxes short-sale constraints, improves the price informativeness of brown stocks, and is suggestive of long-term improvements in their environmental practices. These findings highlight how passive funds express non-pecuniary preferences by forming targeted securities lending habitats.

Pension fund boards must decide how to invest on behalf of millions of members, including when investment choices involve trade-offs between financial returns and social impact. Making these decisions well requires boards to understand their members' considered social preferences. We introduce deliberative democracy tools as a method for eliciting these preferences. Deliberation exposes members to balanced expert information, creates structured opportunities for peer exchange, and helps members work through complex trade-offs before expressing their views. Partnering with a large Dutch pension fund, we conduct two field experiments that combine a deliberative mini-public with a binding maxi-public vote. In the mini-public, 49 randomly selected members participate in a three-day, in-person process of structured peer deliberation and balanced expert briefings on sustainable investing. After deliberation, participants formulate and vote on recommendations for the pension board. Deliberation does not change how much financial return members are willing to sacrifice for sustainable investing. What changes is how members approach the trade-off. As knowledge increases, non-consequentialist views fall from 34.9% to 9.3% and consequentialist views rise from 20.9% to 44.2%. Mini-public members produce several recommendations for the pension board, among which expanding impact investing features prominently. To test whether this reflects the broader membership, the board puts the impact investing question to a binding vote. A total of 13,619 members participate, choosing between stopping, maintaining, or expanding impact investing, with the explicit understanding that the outcome determines actual portfolio allocations. We communicate that impact investing can reduce pension payments at retirement, but may also have positive environmental and social impacts. Despite this financial trade-off, a clear majority favors expansion over stopping. The mini-maxi-public translates considered social preferences into consequential investment decisions: the board commits to increasing impact investments from 300 million to 1.2 billion euros.

We develop a model studying how financing frictions affect a firm’s carbon footprint as well as its transition to sustainable technologies, while allowing for multiple types of green investment: abatement of carbon emissions, adoption of available technologies, and green innovation. Financing frictions impact each type of green investment differently—with abatement unaffected, a negative effect on adoption, and an ambiguous impact on green innovation. Financing frictions reduce current emissions by contracting production, but have a negative impact on the transition to greener technologies in firms relying mainly on adoption. We further show tilting strategies need not boost green innovation, exclusion strategies mainly curb current emissions, and subsidies to adoption help incentivize green innovation too