From "Why" to "Why Not": Deriving the Demand for Sustainable Investing: An Information Provision Experiment

Abstract

There is little evidence of how investors view sustainable investments and what they expect from impact metrics. We lack evidence of how these beliefs affect the willingness to pay for sustainable investments and the effect of correcting those beliefs by providing the investors with information about the actual impact. Using a survey and an information provision experiment, the study finds that investors have optimistic beliefs (high expectations) about social impact but pessimistic beliefs (low expectations) about environmental impact and that consumers with optimistic beliefs about impact measures have a higher willingness to pay compared to consumers with pessimistic beliefs. The information treatment results in a positive average treatment effect, which means that fully informed consumers on average have a higher willingness to pay for sustainable investing compared to consumers with imperfect information. Zooming in on the effect, the optimistic consumer decreased their willingness to pay when fully informed, suggesting that impact reporting in some cases might be harmful to the investor’s willingness to pay