Investor Psychology and Sustainable Finance
52 Pages Posted: 23 Mar 2019
Date Written: February 28, 2019
Although significant attention has been paid to the incorporation of sustainability criteria into investment decisions, these remain far from a mainstream practice. Starting with the view that the notion of “doing good while doing well” is inconsistent, this paper argues that this paradigm warrants a behavioral foundation. To this end, I propose a theoretical model of preferences for sustainable investing; sketch the empirical and experimental evidence regarding investor psychology as a determinant of sustainable investing; suggest an array of fundamental behavioral parameters that have yet to be explored; and outline ways for leveraging insights from behavioral economics to nudge investors towards sustainability.
Keywords: sustainable finance, investor behavior, heuristics and biases
JEL Classification: G11, G41, D01, D91, Q50
Suggested Citation: Suggested Citation