A Breath of Change: Can Personal Exposures Drive Green Preferences?

Abstract

Are investors' preferences for responsible investing affected by their idiosyncratic personal experiences? Using a comprehensive dataset with hospital visits and information on portfolio holdings by retail investors in Denmark, we show that when an investor's child is diagnosed with a respiratory disease, the investor decreases (increases) portfolio weights of ``brown" (``green”) stocks but does not alter their holdings of ESG funds. Consistent with parents attributing respiratory diseases to air pollution, we find no effects for non-respiratory diseases. The results are stronger for more severe diseases and are driven by parents who live with their children.