Knowledge, Fear and Beliefs: Understanding Household Demand for Green Investments

35 Pages Posted: 5 Apr 2019 Last revised: 12 Apr 2019

See all articles by Anders Anderson

Anders Anderson

Swedish House of Finance

David T. Robinson

Fuqua School of Business, Duke University; National Bureau of Economic Research (NBER); Duke Innovation & Entrepreneurship Initiative

Date Written: March 15, 2019

Abstract

We explore whether households understand the tradeoffs that they face when they invest in funds that purport to be environmentally responsible. We conduct a large scale survey of Swedish households to measure how much they understand about the science behind environmental impact, their financial literacy, as well as their understanding of their own knowledge of these matters. We find only moderate correlation in knowledge between environmental and financial knowledge, but find the correlation of overestimation across domains to be sizable. Overestimation of environmental knowledge crowds out actual knowledge when explaining fears of climate change and reported recycling behavior, and is also strongly associated with beliefs that environmentally sustainable firms generate higher returns and with the willingness to pay higher fees for sustainable mutual funds.

Keywords: sustainability; overconfidence; environmental risks

JEL Classification: G02; G11; G18

Suggested Citation

Anderson, Anders and Robinson, David T., Knowledge, Fear and Beliefs: Understanding Household Demand for Green Investments (March 15, 2019). Swedish House of Finance Research Paper No. 19-6. Available at SSRN: https://ssrn.com/abstract=3353534 or http://dx.doi.org/10.2139/ssrn.3353534

Anders Anderson (Contact Author)

Swedish House of Finance ( email )

Drottninggatan 98
111 60 Stockholm
Sweden

David T. Robinson

Fuqua School of Business, Duke University ( email )

100 Fuqua Drive
Durham, NC 27708-0120
United States
919-660-8023 (Phone)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Duke Innovation & Entrepreneurship Initiative ( email )

215 Morris St., Suite 300
Durham, NC 27701
United States

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