Do Investors Care About Impact?

50 Pages Posted: 13 Jan 2021 Last revised: 27 Feb 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

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

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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