Optimistic framing increases responsible investment of investment professionals

Abstract

The global warming crisis is unlikely to abate while the world continues to collectively fund the extraction and burning of fossil fuels. Carbon divestment is urgently needed to ward of the impending climate emergency. Yet responsible investments still only account for a modest share of global assets. We conduct an incentivized artefactual field experiment to test whether framing divestment as a social norm, communicating it by a person with perceived credibility and expertise (a messenger), and highlighting optimistic attributes bolster responsible investment. Our subjects are investment professionals who have significant influence over the allocation of funds. We provide evidence that optimistic framing increases responsible investment. Assuming a comparable effect size, the observed increase would represent a $3.6 trillion USD global shift in asset allocations.

Keywords: responsible investment, sustainable investment, moral judgement; portfolio allocation; behavioral finance; behavioral economics, ESG

JEL Classification: Q54, G11, K32, M14, G41