Climate Fears and the Demand for Green Investment
44 Pages Posted: 27 Nov 2019 Last revised: 14 Jan 2021
Date Written: November 20, 2019
Linking a nationally representative survey to individual pension data, we show how environmental fears, manifesting in extreme beliefs about future climate calamities, are associated with individual portfolio rebalancing decisions. Extreme weather conditions in Sweden in 2014 stoked fears of future environmental calamities, especially in those living closer to the catastrophes. After this heat wave, but not before, investors who fear climate-related catastrophes rebalanced their retirement portfolios towards green investments. This aligns with other behaviors: they also report that they recycle more than their neighbors, think green investments outperform, and are willing to pay higher fees for green mutual funds.
Keywords: Behavioral Finance, Household Finance, Sustainability, ESG, Retirement Savings
JEL Classification: G11, G28
Suggested Citation: Suggested Citation