Do retail investors value environmental impact? A lab-in-the-field experiment with crowdfunders

Abstract

Are investors willing to give up a higher return if the investment generates positive environmental impact? We investigate this question with a decision experiment among crowdfunders, where they choose between a higher return or environmental impact. Overall, 65% of investors choose environmental impact at the expense of a higher return for sufficiently large impact, 14% choose impact independent of the magnitude of impact, while 21% choose the higher return independent of impact. Combining the experimental data with historical investments, we find that investors allocate a larger share of funds to green projects if they value environmental impact more, and if they expect green projects to be more profitable. These findings suggest that investors have a preference for positive environmental impact, and satisfy it by investing in green projects. We further show that the preference for environmental impact is distinct from a preference for positive social impact. Finally, we introduce new survey measures of impact for future use, which are experimentally validated and predict field behavior.

A field experiment on attracting crowdfunders

“…Their findings are contrary to ours, suggesting that the effects of such framing experiments depend on the target audience, which in their case was relatively conservative bank customers. More recently, lab-in-the-field experiments have examined the motivations of early-stage (Siemroth and Hornuf, 2021) and professional (Heeb et al, 2022) investors by presenting them with properly designed experimental choices. This literature largely finds that investors care about the environmental and social aspects of their investment.…”