How ESG Information Determines Emotional Returns of Socially Responsible Investments: Evidence from an Experimental Decision Case

Abstract

This paper is the first to experimentally address the influence of the level of non-financial information provided for a socially responsible investment on the related non-financial, emotional return of non-professional investors and thus on their investment decision.

Based on an experimental investment decision case with 223 participants, results indicate a strong influence of the amount and specific type of information both on the SRI allocation ratio and the willingness to forego financial returns. This effect holds across different return scenarios and is strongest for the presentation of precise non-financial investment criteria. Adding these information on the presentation of the SRI fund can increase the investment ratio up to a tripling, especially in case of a high financial underperformance of the SRI fund. Thus, it can be assumed that there is some form of non-financial, emotional return that can be influenced via the level of information to such an extent as to compensate for foregone financial return.

Keywords: emotional return; non-financial return; SRI; investment decision; non-professional investors; non-financial information; ESG; behavioural finance

JEL Classification: G02, G11, G14, M14