Sustainable Retail Investing: Motivations, Portfolio Consequences and the Role of ESG Ratings

63 Pages Posted: 11 May 2020 Last revised: 16 Jun 2023

See all articles by Amir Amel-Zadeh

Amir Amel-Zadeh

University of Oxford - Said Business School

Rik Lustermans

Vrije Universiteit Amsterdam, School of Business and Economics

Mary Pieterse-Bloem

Erasmus Research Institute of Management (ERIM)

Date Written: May 30, 2023

Abstract

This study examines examines whether, how and to what effect wealthy retail investors use sustainability information in their investment decisions. Using a proprietary dataset of investment holdings of wealthy European retail investors, we exploit a quasi-exogenous shock to the coverage of sustainability ratings available to investors and document a plausibly causal effect of these ratings on investment allocations. We find the preference for assets with high sustainability ratings to stem from non-pecuniary motives and that sustainability is not perceived as a luxury good. We further find that "ESG-minded" investors hold significantly concentrated and under-diversified portfolios, over-allocate to home stocks and hold on longer to unrealised losses than "ESG-agnostic" investors. The former seem to achieve their objectives of investing in more sustainable firms that have fewer social and governance incidents but also overweight carbon-intensive sectors.

Keywords: Sustainable investing, retail investors, ESG ratings, wealthy households, investor behaviour, portfolio characteristics

JEL Classification: G11, G14, G15, G29, G41, G50

Suggested Citation

Amel-Zadeh, Amir and Lustermans, Rik and Pieterse-Bloem, Mary, Sustainable Retail Investing: Motivations, Portfolio Consequences and the Role of ESG Ratings (May 30, 2023). Available at SSRN: https://ssrn.com/abstract=3576687 or http://dx.doi.org/10.2139/ssrn.3576687

Amir Amel-Zadeh (Contact Author)

University of Oxford - Said Business School ( email )

Park End Street
Oxford, OX1 1HP
Great Britain

Rik Lustermans

Vrije Universiteit Amsterdam, School of Business and Economics ( email )

De Boelelaan 1105
Amsterdam, 1081HV
Netherlands

Mary Pieterse-Bloem

Erasmus Research Institute of Management (ERIM) ( email )

P.O. Box 1738
3000 DR Rotterdam
Netherlands

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