Can financial intermediaries help solve the externalities of the real-economy, even when all investors are purely return-driven? This paper develops a general equilibrium model in which firms underinvest in socially valuable transitions and investors allocate capital based solely on financial returns. In this environment, mandated activist funds that seek to influence firm behaviour are not sufficient on their own as other funds free-rides on influence outcome. However, this conclusion changes once households with limited market participation are introduced. When a subset of households saves exclusively through bank deposits, their savings provide low-cost funding that allows activist funds to access leverage through the banking system. This leverage increases the relative returns of activist funds, supports their survival in equilibrium, and enables welfare improvements. This results imply that limited stock market participation - often viewed as a friction - can play a constructive role in addressing real-economy externalities by supporting financial intermediation channels that would otherwise fail to operate.
