It is dark, except for a faint glow of fire from outside. Regina and Pastor Manders are exchanging empty remarks about the tragedy. Engstrand enters, much to the Pastor's dismay. He relentlessly teases the Pastor, insinuating that the fire was started by the prayer candles and is, therefore, the Pastor's fault. He speculates on the public scandal that the fire will cause. Mrs. Alving enters and asks the Pastor to take all the paperwork with him—she doesn't want to think about the orphanage again.
The Pastor speculates that he can devote the money to some charitable cause. Engstrand reminds him of his "home" for sailors, but the Pastor replies that he is worried public opinion will unseat him before he can make any such donation. Engstrand hints that if the Pastor says nothing, he will not have to worry about public opinion. Engstrand even implicitly compares himself to Jesus, who "once took the blame for someone else." The Pastor promises to devote the money to Engstrand's establishment. Engstrand decides to call it "Captain Alving's Home."
At the beginning of the act, the baseness of Engstrand's character is emphasized: not only does he practically blackmail the Pastor, he is pretentious enough to compare himself to Jesus Christ. Most surprisingly, the Pastor blithely accepts this entire campaign. He may have no choice but to accept it, and yet he sees it as a favor on Engstrand's part for his sake.
When the Pastor decided not to buy insurance for the orphan asylum, he was acting under an obsessive concern for public reputation. Now, because of this same concern for public opinion, he has lost what little money he could have salvaged from the uninsured disaster: he gives in to Engstrand's deceitful persuasions and agrees to finance a saloon with the leftover money. In this last appearance of the Pastor, we see his gullibility and his concern for public opinion united, looming over all thoughts of the Pastor's own. He is so dependent on others that he must believe everything they say and think.
The irony in the name "Captain Alving's Home" is fairly obvious. It will be a house of debauchery, as the real captain was a man of debauchery, but the Pastor will fund it because he thinks it will be a house of public service, just as the memorial was set up to honor the captain's reputation. Engstrand's establishment will be a truly fitting memorial to Captain Alving.