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| Type | Working Paper |
| Scope | Discipline-based scholarship |
| Title | Cognitive Barriers to Sustainable Investing: Unleashing the Power of Wealthy Private Investors |
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| Institution | University of Zurich |
| Series Name | DSF Policy Paper |
| Number | 41 |
| Date | 2014 |
| Abstract Text | Sustainable investing (SI) has lately been viewed as a mainstream investment style. However, this notion can be questioned since private investors appear substantially underrepresented in SI compared to institutional investors. In this study, we empirically explore SI-barriers for private investors. We provide insights from interviews with High Net Worth Individuals (HNWIs), an economically highly significant yet secretive and thus little researched segment of private investors. Our results indicate substantial interest in SI amongst HNWIs, while the perception of what SI entails varied across individuals. From our analysis, we propose three specific SI-barriers. The first is an SI-information asymmetry based on investment advisors’ perception that appears to misinterpret clients’ interest in SI. The second relates to HNWIs’ perception of SI to be more volatile then average investments. This perception limits the engagement in SI in situations where the investor has a short-term investment horizon. The third barrier highlights the role of recent financial losses. In situations where the investor experienced such losses, the perception of SI as being more volatile than average investments results in less SI engagement. We reflect on these empirical results by drawing on insights from Prospect Theory and propose avenues for future research. In sum, this paper shows that investors’ cognition of SI appears to be an important engagement reason that goes beyond the usual business-case-arguments. |
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