The Impact of Sustainable Finance Literacy on Investment Decisions

Abstract

This paper studies the impact of an educational program on Sustainable Finance Literacy (SFL) and the impact of this program on sustainable investment decisions. For this purpose, we conducted a randomized controlled trial (RCT) and an incentivized choice experiment. Our findings demonstrate that the SFL educational treatment significantly improves literacy while considering the influence of priming. Participants exposed to the SFL program were more likely to invest in highly sustainable funds by 6 percentage points and less likely to choose less sustainable options with magnitudes between 3 and 2.5 percentage points. The treatment effects increased by up to one half among investors with pre-existing green attitudes. In addition, we provide suggestive evidence that a higher SFL leads to more accurate sustainability perceptions and reduces the tendency to chase high past returns.

Keywords: Sustainable Finance Literacy, RCT, text analysis, household finance

JEL Classification: G11, G18, G53, C83