Is Sustainable Finance a Dangerous Placebo?

Abstract

A first-order concern regarding sustainable finance is that it may crowd out individual support for more effective, policy-driven approaches to address societal challenges. We test the validity of this concern in a pre-registered experiment in the context of a real referendum on a climate law with a representative sample of the Swiss population (N=2,051). We find that the opportunity to invest in a climate-conscious fund does not erode individuals’ support for climate regulation. While sustainable finance may resemble a placebo in the sense that individuals appear very optimistic about its societal impact, it is not a dangerous placebo that crowds out political engagement.

Keywords: Behavioral Finance, Climate Change, ESG, Externalities, Sustainable Finance, Political Economy, Voting Behavior

JEL Classification: D14, H42, G18, P16