Virtual investment experiment indicates informed consumers choose sustainable funds even with reduced returns


25-10-2019
  Person using phone and laptop  Credit: Austin Distel on Unsplash

A new study has shown that when given clear social and environmental performance data, consumers display an appetite for sustainable investment, even with lower returns.

Research by the University of Cambridge Institute for Sustainability Leadership (CISL) simulated real-world investment scenarios in order to analyse the extent the investing public values sustainability.

The ‘virtual investment experiment’ offered a unique, science-based rating format developed by CISL to help people understand easily the sustainable performance of funds. The study found a strong preference for sustainable investing even with a 2-3 per cent sacrifice in returns.

The study also found that participants under 35 and inexperienced savers had a stronger preference for sustainable investment; while income, gender and education had no effect on preference. It also showed there was stronger preference for avoiding funds rated poorly for sustainability than for actively choosing funds with high sustainability, indicating avoiding negative environmental and social impacts is more influential in decision-making than the pursuit of positive impacts.

“The study shows that people want more from their capital than only financial returns,” said Dr Jake Reynolds, Executive Director, Sustainable Economy, CISL. “Given the right information, they will avoid investments which harm people or the environment.

“In the real world most savers are not provided with that information; meaning they are unable to make positive choices. Given what we know about climate change, destruction of nature and high levels of inequality, that needs to change.”

Walking the talk: Understanding consumer demand for sustainable investing’ is a collaboration between CISL, the Department of Psychology and the Psychometrics Centre, and was commissioned by the Investment Leaders Group (ILG), which is convened by CISL.

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Image:  Person using phone and laptop

Credit: Austin Distel on Unsplash

Reproduced courtesy of the University of Cambridge

 

The University of Cambridge is acknowledged as one of the world's leading higher education and research institutions. The University was instrumental in the formation of the Cambridge Network and its Vice- Chancellor, Professor Stephen Toope, is also the President of the Cambridge Network.

University of Cambridge (cam.ac.uk)