Do Investors Care About Impact?

Forthcoming in The Review of Financial Studies

75 Pages Posted: 13 Jan 2021 Last revised: 20 Jul 2022

See all articles by Florian Heeb

Florian Heeb

University of Zurich, Department of Banking and Finance

Julian F Kölbel

University of Zurich, Department of Banking and Finance; MIT Sloan

Falko Paetzold

EBS Universität für Wirtschaft und Recht; University of Zurich, Center for Sustainable Finance and Private Wealth

Stefan Zeisberger

Radboud University, Institute for Management Research; University of Zurich, Department of Banking and Finance

Date Written: January 5, 2022

Abstract

We assess how investors’ willingness-to-pay (WTP) for sustainable investments responds to the social impact of those investments, using a framed field experiment. While investors have a substantial WTP for sustainable investments, they do not pay significantly more for more impact. This also holds for dedicated impact investors. When investors compare several sustainable investments, their WTP responds to relative but not to absolute levels of impact. Regardless of investments' impact, investors experience positive emotions when choosing sustainable investments. Our findings suggest that the WTP for sustainable investments is primarily driven by an emotional rather than a calculative valuation of impact.

Keywords: responsible investing, social impact, externalities, scope neglect, pro-social preferences, behavioral finance

JEL Classification: D62, G11, G41, Q56

Suggested Citation

Heeb, Florian and Kölbel, Julian and Paetzold, Falko and Zeisberger, Stefan, Do Investors Care About Impact? (January 5, 2022). Forthcoming in The Review of Financial Studies, Available at SSRN: https://ssrn.com/abstract=3765659 or http://dx.doi.org/10.2139/ssrn.3765659

Florian Heeb (Contact Author)

University of Zurich, Department of Banking and Finance ( email )

Schönberggasse 1
Zurich
Switzerland

Julian Kölbel

University of Zurich, Department of Banking and Finance

Schönberggasse 1
Zurich
Switzerland

MIT Sloan ( email )

100 Main Street
Cambridge, MA 02142
United States

Falko Paetzold

EBS Universität für Wirtschaft und Recht ( email )

Gustav-Stresemann-Ring 3
Wiesbaden, Hessen 65189
Germany

HOME PAGE: http://www.ebs.edu

University of Zurich, Center for Sustainable Finance and Private Wealth ( email )

Plattenstr 32
Zurich, 8032
Switzerland

HOME PAGE: http://www.csp.uzh.ch

Stefan Zeisberger

Radboud University, Institute for Management Research ( email )

Nijmegen
Netherlands

University of Zurich, Department of Banking and Finance ( email )

Zürich
Switzerland

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