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We document fragile demand for socially responsible investments (SRIs) by retail mutual fund investors. Using COVID-19 as an economic shock, we show funds with higher sustainability ratings experienced sharper declines in retail flows during the pandemic, controlling for fund characteristics. The decline in retail SRI fund flows is sharper than that of institutional flows, more pronounced when economies are hit harder by COVID-19, and unlikely to be driven by fund performance, past flows and size, or shifting investor attention. Corroborated by out-of-sample survey evidence, our findings highlight the high sensitivity of SRI demand by retail investors with respect to income shocks.

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We study the redistributive e↵ects of a gradual productivity shift from tangible to intangible capital. Intangible asset creation relies on the commitment of skilled human capital. To ensure retention, firms reward innovators by deferred compensation, so funding demand by firms drops as the importance of intangible assets rises. Since human capital income is not tradable, the supply of investable assets falls and innovator rents rise. The general equilibrium e↵ect is a fall in interest rates, while surplus savings are stored in higher asset valuations. This shift leads to increasing inequality and skewness in both the capital and labor income share. Rising house prices and wage inequality lead to higher household leverage.