Do Investors Care About Impact?
50 Pages Posted: 13 Jan 2021 Last revised: 27 Feb 2021
Date Written: February 25, 2021
In a framed field experiment, we assess how investors’ willingness-to-pay (WTP) for a sustainable investment responds to the investment’s impact in the form of CO2 emission savings. We find that, although investors have a substantial WTP for sustainable investments, they do not pay more for an investment with more impact. This finding also holds for a unique sample of dedicated impact investors. We further show that investors’ WTP responds to impact when they can directly compare several investment options. Yet, the response is far from being proportional to the level of investments’ impact. Our findings indicate that the WTP for sustainable investments depends strongly on the presented choice set and the emotional experience of choosing a sustainable option. Further, our findings suggest that investors do not optimize the impact of their investments but instead optimize the “warm glow” they gain from investing sustainably, which has important implications for modeling the overall impact of sustainable investing on the economy.
Keywords: responsible investing, impact, externalities, scope neglect, pro-social preferences, behavioral finance
JEL Classification: D62, G11, G41, Q56
Suggested Citation: Suggested Citation