IDEAS home Printed from https://ideas.repec.org/a/eee/ecolet/v234y2024ics0165176523004548.html
   My bibliography  Save this article

Investors' preferences for sustainable investments: Evidence from the U.S. using an experimental approach

Author

Listed:
  • Harasheh, Murad
  • Bouteska, Ahmed
  • Manita, Riadh

Abstract

In addition to the classical risk-return approach in investment, there is an increasing awareness of integrating sustainable development goals (SDGs) as a new dimension to value creation. However, limited research has been conducted, offering mixed results. Therefore, we examined investor preferences for investment funds that contribute to achieving the SDGs of clean water and sanitation. We used a choice experiment to analyze the funds' value for U.S. investors, adopting a survey approach based on 581 actual observations from October to December 2022. The findings reveal that investors show stronger preferences for portfolios that contribute to the development goals; they are willing to forgo returns when investments contain SDGs or are provided by sustainable banks. These findings have implications for investors and fund managers.

Suggested Citation

  • Harasheh, Murad & Bouteska, Ahmed & Manita, Riadh, 2024. "Investors' preferences for sustainable investments: Evidence from the U.S. using an experimental approach," Economics Letters, Elsevier, vol. 234(C).
    • Handle: RePEc:eee:ecolet:v:234:y:2024:i:c:s0165176523004548
    DOI: 10.1016/j.econlet.2023.111428
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0165176523004548
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.econlet.2023.111428?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Darren D. Lee & Jacquelyn E. Humphrey & Karen L. Benson & Jason Y. K. Ahn, 2010. "Socially responsible investment fund performance: the impact of screening intensity," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 50(2), pages 351-370, June.
    2. Glynn T. Tonsor & Robert S. Shupp, 2011. "Cheap Talk Scripts and Online Choice Experiments: "Looking Beyond the Mean"," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 93(4), pages 1015-1031.
    3. Joliet, Robert & Titova, Yulia, 2018. "Equity SRI funds vacillate between ethics and money: An analysis of the funds’ stock holding decisions," Journal of Banking & Finance, Elsevier, vol. 97(C), pages 70-86.
    4. Renneboog, Luc & Ter Horst, Jenke & Zhang, Chendi, 2011. "Is ethical money financially smart? Nonfinancial attributes and money flows of socially responsible investment funds," Journal of Financial Intermediation, Elsevier, vol. 20(4), pages 562-588, October.
    5. Renneboog, Luc & Ter Horst, Jenke & Zhang, Chendi, 2008. "The price of ethics and stakeholder governance: The performance of socially responsible mutual funds," Journal of Corporate Finance, Elsevier, vol. 14(3), pages 302-322, June.
    6. Auer, Benjamin R. & Schuhmacher, Frank, 2016. "Do socially (ir)responsible investments pay? New evidence from international ESG data," The Quarterly Review of Economics and Finance, Elsevier, vol. 59(C), pages 51-62.
    7. Willem Schramade, 2017. "Investing in the UN Sustainable Development Goals: Opportunities for Companies and Investors," Journal of Applied Corporate Finance, Morgan Stanley, vol. 29(2), pages 87-99, June.
    8. Train,Kenneth E., 2009. "Discrete Choice Methods with Simulation," Cambridge Books, Cambridge University Press, number 9780521766555, November.
    9. Apostolakis, George & van Dijk, Gert & Kraanen, Frido & Blomme, Robert J., 2018. "Examining socially responsible investment preferences: A discrete choice conjoint experiment," Journal of Behavioral and Experimental Finance, Elsevier, vol. 17(C), pages 83-96.
    10. Kelvin J. Lancaster, 1966. "A New Approach to Consumer Theory," Journal of Political Economy, University of Chicago Press, vol. 74(2), pages 132-132.
    11. James X. Zhan & Amelia U. Santos-Paulino, 2021. "Investing in the Sustainable Development Goals: Mobilization, channeling, and impact," Journal of International Business Policy, Palgrave Macmillan, vol. 4(1), pages 166-183, March.
    12. Gunnar Friede & Timo Busch & Alexander Bassen, 2015. "ESG and financial performance: aggregated evidence from more than 2000 empirical studies," Journal of Sustainable Finance & Investment, Taylor & Francis Journals, vol. 5(4), pages 210-233, October.
    13. Laura O. Taylor & Ronald G. Cummings, 1999. "Unbiased Value Estimates for Environmental Goods: A Cheap Talk Design for the Contingent Valuation Method," American Economic Review, American Economic Association, vol. 89(3), pages 649-665, June.
    14. James Murphy & Thomas Stevens & Darryl Weatherhead, 2005. "Is Cheap Talk Effective at Eliminating Hypothetical Bias in a Provision Point Mechanism?," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 30(3), pages 327-343, March.
    15. Gutsche, Gunnar & Nakai, Miwa & Arimura, Toshi H., 2021. "Revisiting the determinants of individual sustainable investment—The case of Japan," Journal of Behavioral and Experimental Finance, Elsevier, vol. 30(C).
    16. Jayson L. Lusk, 2003. "Effects of Cheap Talk on Consumer Willingness-to-Pay for Golden Rice," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 85(4), pages 840-856.
    17. Revelli, Christophe, 2017. "Socially responsible investing (SRI): From mainstream to margin?," Research in International Business and Finance, Elsevier, vol. 39(PB), pages 711-717.
    18. Alfredo J. Escribano & Maria Belen Peña & Carlos Díaz-Caro & Ahmed Elghannam & Eva Crespo-Cebada & Francisco J. Mesías, 2021. "Stated Preferences for Plant-Based and Cultured Meat: A Choice Experiment Study of Spanish Consumers," Sustainability, MDPI, vol. 13(15), pages 1-21, July.
    19. Fredrik Carlsson & Peter Martinsson, 2003. "Design techniques for stated preference methods in health economics," Health Economics, John Wiley & Sons, Ltd., vol. 12(4), pages 281-294, April.
    20. Gerhard Halbritter & Gregor Dorfleitner, 2015. "The wages of social responsibility — where are they? A critical review of ESG investing," Review of Financial Economics, John Wiley & Sons, vol. 26(1), pages 25-35, September.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Dong, Xinzhong & Wang, Ying, 2024. "Intellectual property, resource curse, and the path to sustainable investment in China," Resources Policy, Elsevier, vol. 97(C).
    2. Hongyu Xiang, 2024. "Commitment to the ESG investing and Individual Mutual Fund Investors’ Preference: Evidence from Stated Choice Experiments," Journal of Applied Finance & Banking, SCIENPRESS Ltd, vol. 14(2), pages 1-6.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Richartz, P. Christoph & Abdulai, Awudu & Kornher, Lukas, 2020. "Attribute Non Attendance and Consumer Preferences for Online Food Products in Germany," German Journal of Agricultural Economics, Humboldt-Universitaet zu Berlin, Department for Agricultural Economics, vol. 69(01), March.
    2. Lagerkvist, C.J. & Edenbrandt, A.K. & Tibbelin, I. & Wahlstedt, Y., 2020. "Preferences for sustainable and responsible equity funds - A choice experiment with Swedish private investors," Journal of Behavioral and Experimental Finance, Elsevier, vol. 28(C).
    3. Mohammed H. Alemu & Søren B. Olsen, 2017. "Can a Repeated Opt-Out Reminder remove hypothetical bias in discrete choice experiments? An application to consumer valuation of novel food products," IFRO Working Paper 2017/05, University of Copenhagen, Department of Food and Resource Economics.
    4. Penn, Jerrod & Hu, Wuyang, 2016. "Making the Most of Cheap Talk in an Online Survey," 2016 Annual Meeting, July 31-August 2, Boston, Massachusetts 236171, Agricultural and Applied Economics Association.
    5. Klaiman, Kimberly & Ortega, David L. & Garnache, Cloé, 2016. "Consumer preferences and demand for packaging material and recyclability," Resources, Conservation & Recycling, Elsevier, vol. 115(C), pages 1-8.
    6. Ladenburg, Jacob & Olsen, Søren Bøye, 2014. "Augmenting short Cheap Talk scripts with a repeated Opt-Out Reminder in Choice Experiment surveys," Resource and Energy Economics, Elsevier, vol. 37(C), pages 39-63.
    7. Shijun Gao & Carola Grebitus & Karen L. DeLong, 2024. "Explaining consumer willingness to pay for country‐of‐origin labeling with ethnocentrism, country image, and product image: Examples from China's beef market," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 72(2), pages 149-166, June.
    8. Robert J. Johnston & Kevin J. Boyle & Wiktor (Vic) Adamowicz & Jeff Bennett & Roy Brouwer & Trudy Ann Cameron & W. Michael Hanemann & Nick Hanley & Mandy Ryan & Riccardo Scarpa & Roger Tourangeau & Ch, 2017. "Contemporary Guidance for Stated Preference Studies," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 4(2), pages 319-405.
    9. Ved Dilip Beloskar & S. V. D. Nageswara Rao, 2024. "Screening activity matters: Evidence from ESG portfolio performance from an emerging market," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 29(3), pages 2593-2619, July.
    10. Ana I. Sanjuán‐López & Helena Resano‐Ezcaray, 2020. "Labels for a Local Food Speciality Product: The Case of Saffron," Journal of Agricultural Economics, Wiley Blackwell, vol. 71(3), pages 778-797, September.
    11. Mark A. Andor & Manuel Frondel & Colin Vance, 2017. "Mitigating Hypothetical Bias: Evidence on the Effects of Correctives from a Large Field Study," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 68(3), pages 777-796, November.
    12. Julia Blasch & Robert W. Turner, 2016. "Environmental art, prior knowledge about climate change, and carbon offsets," Journal of Environmental Studies and Sciences, Springer;Association of Environmental Studies and Sciences, vol. 6(4), pages 691-705, December.
    13. Ladenburg, Jacob & Olsen, Søren Bøye, 2008. "Gender-specific starting point bias in choice experiments: Evidence from an empirical study," Journal of Environmental Economics and Management, Elsevier, vol. 56(3), pages 275-285, November.
    14. De Marchi, Elisa & Caputo, Vincenzina & Nayga, Rodolfo M. & Banterle, Alessandro, 2016. "Time preferences and food choices: Evidence from a choice experiment," Food Policy, Elsevier, vol. 62(C), pages 99-109.
    15. Ching-Hua Yeh & Monika Hartmann, 2021. "To Purchase or Not to Purchase? Drivers of Consumers’ Preferences for Animal Welfare in Their Meat Choice," Sustainability, MDPI, vol. 13(16), pages 1-25, August.
    16. Gerasimos G. Rompotis, 2022. "The ESG ETFs in the UK," Journal of Asset Management, Palgrave Macmillan, vol. 23(2), pages 114-129, March.
    17. Díaz, Antonio & Escribano, Ana & Esparcia, Carlos, 2024. "Sustainable risk preferences on asset allocation: a higher order optimal portfolio study," Journal of Behavioral and Experimental Finance, Elsevier, vol. 41(C).
    18. Amilon, Anna & Ladenburg, Jacob & Siren, Anu & Vernstrøm Østergaard, Stine, 2020. "Willingness to pay for long-term home care services: Evidence from a stated preferences analysis," The Journal of the Economics of Ageing, Elsevier, vol. 17(C).
    19. Kar Ho Lim & Wuyang Hu, 2023. "Contextual reference price in choice experiments," American Journal of Agricultural Economics, John Wiley & Sons, vol. 105(4), pages 1288-1306, August.
    20. David J Lewis & Steven J Dundas & David M Kling & Daniel K Lew & Sally D Hacker, 2019. "The non-market benefits of early and partial gains in managing threatened salmon," PLOS ONE, Public Library of Science, vol. 14(8), pages 1-15, August.

    More about this item

    Keywords

    Investor preferences; Sustainability; Investment decisions; U.S. environment;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:ecolet:v:234:y:2024:i:c:s0165176523004548. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/ecolet .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.