We study how environmental, social, and governance (ESG) investing reshapes investors'
information-searching decisions. We develop a rational expectations equilibrium (REE) with
endogenous information-searching decisions, in which traditional and green investors have
distinct preferences for monetary and non-monetary risks. These investor groups seek
different information from a security's price. The heterogeneity in price interpretation makes
investors with heterogeneous preferences focus more on the same risk component that is …