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Which private investors are willing to pay for sustainable investments? Empirical evidence from stated choice experiments

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  • Gutsche, Gunnar
  • Ziegler, Andreas

Abstract

Based on data from a representative survey among German private financial decision makers that comprised two stated choice experiments for fixed-interest investment products and equity funds, this paper empirically examines whether and which investors are willing to pay for sustainable investments. In fact, our econometric analyses with mixed and latent class logit models reveal strong stated preferences and a considerable willingness to pay (WTP) for sustainable investment products. Furthermore, our mixed logit model analysis implies that the mean WTP for certified sustainable investment products is strongly higher than the mean WTP for the uncertified counterparts. In addition, our estimation results suggest that investors with high feelings of warm glow from sustainable investments, an affinity to left-wing parties, and a strong environmental awareness have a clearly higher mean willingness to sacrifice returns for sustainable investment products than their counterparts. While risk perceptions seem to be additionally relevant for certified sustainable equity funds, they obviously play a negligible role for less risky sustainable fixed-interest investment products.

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  • Gutsche, Gunnar & Ziegler, Andreas, 2019. "Which private investors are willing to pay for sustainable investments? Empirical evidence from stated choice experiments," Journal of Banking & Finance, Elsevier, vol. 102(C), pages 193-214.
    • Handle: RePEc:eee:jbfina:v:102:y:2019:i:c:p:193-214
    DOI: 10.1016/j.jbankfin.2019.03.007
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    More about this item

    Keywords

    Sustainable investments; Stated choice experiments; Mixed logit models; Latent class logit models; Willingness to pay; Psychological motives; values; norms;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility
    • G02 - Financial Economics - - General - - - Behavioral Finance: Underlying Principles
    • A13 - General Economics and Teaching - - General Economics - - - Relation of Economics to Social Values
    • C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions; Probabilities

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