Do Investors Care About Impact?
Forthcoming in The Review of Financial Studies
75 Pages Posted: 13 Jan 2021 Last revised: 20 Jul 2022
Date Written: January 5, 2022
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: Suggested Citation