2024-07-08 14:09:17
Green finance has been making progress over the years. Many investment opportunities Green finance products now available in FranceIf the French widely declare that the environmental impact of their investments is important, the fact remains that the portion of their savings devoted to responsible investing is still small. While 75% of the French consider the environmental impact of their investments an important topic, 57% of responsible fund holders invest less than a quarter of their savings in these funds. According to an Opinionway survey conducted by the Financial Markets Authority). In addition, if the French are interested in green savings, they still prefer Financial and sustainable dimensions in investment selection (Le Cercle des Savers, February 2024, p. 15). This gap between intentions and actions raises questions regarding the motivations behind investment choices.
Our ArticlesThe recent publication Green Investment examines the motivations of individual investors to make green investments. In addition to the extrinsic financial motivations clearly identified in the academic literature (Riedl and Smeets, 2017, Anderson and Robinson, 2021 or Deskran and Pedersen, 2016), more intrinsic motivations may step in. We examine the extent to which an individual’s desire to “do good” influences the choice to invest in green funds.
Three Ways to Do Good
To do this, we identified three ways of expressing the desire to do good. First, some people choose to actively participate in improving the world. They want to have a positive impact on the environment and society and believe that their green investments will have a positive impact. This is what we call doing good. Second, some people sincerely care regarding the well-being of others and the planet. In this case, we talk regarding altruism (the intention to do good). Third, and finally, some people gain happiness (“feel good”) from doing good and feel positive emotions (these positive emotions are often referred to as a “warm glow”).
While some aspects have already been identified, our article is the first to simultaneously examine the impact of these three dimensions of the desire to do good – “doing good”, “being good” and “feeling good” – on the actual decision to invest in green funds. The report is based on data collected by Panelabs between December 2021 and January 2022 from a sample of 2,288 French investors aged at least 25 with at least €500 invested in equity funds. The average investor was 47 years old, had an average net monthly income of €3,334 and an average portfolio invested in stocks of €8,893. A large proportion of respondents (regarding two-thirds) had children, with women accounting for 46.4% of the sample.
Investors are considered “green” investors if they have invested at least €500 in so-called “deep green” funds within the meaning of the European SFDR Regulation (Sustainable Finance Disclosure Regulation, 2019/2088). These funds are called “Article 9” funds and their sole objective is to make environmentally sustainable investments. Investors’ motivations (“doing good”, “doing good”, and “feeling good”) are measured using a 7-point scale. We study the impact of these variables on investment decisions.
The power of altruism
Our results show that both the desire for impact (“doing good”) and altruism (“doing good”) have a significant impact on investment decisions, while the affective dimension (“feeling good”) does not. The most profound variable is altruism, which has a much larger impact than the desire for impact. Thus, doing good is clearly the strongest intrinsic motivation for people to invest in green action funds.
In our analysis, we controlled for several individual characteristics (age, gender, education level, parenthood, financial literacy level, level of information regarding green funds, investment horizon, net income, and value of investment stock portfolio) and found that being female, having a long-term investment horizon, and having children also positively influence the decision to invest in green funds. This suggests that the most future-oriented and other-oriented investors are the ones most likely to invest in green funds.
To refine these results, we examine the effects of these orientations toward the future and others by dividing the sample by age, investment horizon, children, and gender. Only younger investors and children with a longer investment horizon consider impact (“doing good”) important for their decision to invest in green funds. This supports the moderating effect of future orientation on the desire to do good in the green investment decision process.
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Altruism (“doing good”) always had a significant effect, while happiness (“feeling good”) had less. Overall, these results suggest that the most important and powerful factor explaining green fund investment decisions is altruism.
Non-economic motives
Our paper therefore highlights the role of non-financial motivations in shaping green investment behavior. Notably, positive emotions (“warm glow,” “feeling good”) had no effect on green investment decisions. This suggests that, contrary to previous research, Emotional rewards influence sustainable investingIn real investment contexts, rational considerations of impact and altruistic motives appear to drive investment decisions more than emotional satisfaction. These results call for the inclusion of environmental factors in common decision models in finance.
Furthermore, our study has practical implications for fund sellers: targeting altruistic clients who already donate to charitable organizations might help promote green investments in French equities. Moreover, promoting the positive impact of environmental funds might be a way to incentivize individuals to invest for the long term, thereby contributing to the transition to an ecologically focused economy. However, the asset management industry should be careful in using green arguments, as the controversy over “greenwashing” has weakened the perception of the impact of such funds.
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