Do Investors Care About Impact?

60 Pages Posted: 13 Jan 2021 Last revised: 20 Jul 2021

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: February 25, 2021

Abstract

We assess how investors' willingness-to-pay (WTP) for sustainable investments responds to the impact of those investments, using a framed field experiment. Although investors have a substantial WTP for sustainable investments, they do not pay more for investments with more impact. This also holds for dedicated impact investors. When investors compare several sustainable investments, their WTP increases with impact, but depends strongly on the choice set. Investors experience positive emotions when choosing a sustainable investment, irrespective of the investment’s impact. These findings suggest that the WTP for sustainable investments is driven by "warm glow" and not by deliberate evaluations of impact.

Keywords: responsible investing, 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? (February 25, 2021). 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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