Pensions and Investments: Social and Environmental Preferences of Beneficiaries, and Financial Illiteracy

36 Pages Posted: 4 Dec 2013

See all articles by Arian Borgers

Arian Borgers

Maastricht University

Rachel A.J. Pownall

Tilburg University - Department of Finance; Maastricht University - Department of Finance

Date Written: December 3, 2013

Abstract

Institutional investors invest billions of dollars on behalf of investors whilst knowing little about investors’ social values. Using survey data from a customized wave of the Dutch CentERdata panel for citizens who are obliged to participate in a pension plan, we find significant variation in stated preferences towards proposed social investment screens. Although individuals are able to express their preferences towards social investment criteria they are not able to translate these values into investment decisions consistently. This is partially driven by the low financial sophistication of households. To emphasize the importance of these findings we show that the majority of beneficiaries derive positive utility from environmental and social pension investment screens and that expressing a preference towards screened pension investments is the most important driver of this effect.

Keywords: Social values, Fiduciary duty, Financial literacy, Pension funds

JEL Classification: G23, H4, I22

Suggested Citation

Borgers, Arian and Pownall, Rachel Ann Jane, Pensions and Investments: Social and Environmental Preferences of Beneficiaries, and Financial Illiteracy (December 3, 2013). Available at SSRN: https://ssrn.com/abstract=2363106 or http://dx.doi.org/10.2139/ssrn.2363106

Arian Borgers

Maastricht University ( email )

P.O. Box 616
Maastricht, 6200MD
Netherlands

Rachel Ann Jane Pownall (Contact Author)

Tilburg University - Department of Finance ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

Maastricht University - Department of Finance ( email )

Maastricht, 6200 MD
Netherlands

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