Sustainability and private investors

Abstract

Private investors are an increasingly important voice in sustainability challenges. We examine investors’ attitudes and behavior toward sustainable investing through a survey of 5030 Finnish private investors. We document that 60 percent of all respondents consider environmental, social, and governance (ESG) factors when making investment decisions. Our results indicate that women and millennials are more likely to follow sustainable investment strategies than investors on average. We also find that language background, location, and education levels influence investment behavior. Moreover, our findings suggest that both sustainable and traditional investors are willing to take risks in their investment strategy. We also report the effects of the COVID pandemic on investor behavior and find that investors who started investing during the pandemic are less likely to choose traditional investment strategies. Our findings have implications for financial market participants and policymakers.

KEYWORDS:

• Private investors
• sustainability
• investment strategies
• ESG
• risk-taking
• COVID-19

JEL:

• G01
• G21
• G30
• M14

Acknowledgements

The authors thank Cathy (Xinyu) Cao, Ben Chen, Eva Liljeblom, Guillermo Badía, David Gabreros González, Janna Haahtela, Morten Huse, Esa Jokivuolle, Veronica Palmgren, Suvi Tuppurainen, Sari Lounasmeri, Eva Ström for their comments. We also thank the Bank of Finland, NordNet, SUERF – The European Money and Finance Forum and participants at the 2023 European Accounting Association Meetings (Finland), 2022 International Workshop on ESG-Values, the 2022 Nordic Corporate Governance Network’s Workshop (Denmark), 2022 Southern Finance Association, 2022 Hanken Research Day and 3rd Annual Boca Corporate Finance and Corporate Conference (USA).

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

1 The millennial generation (also known as generation Y) was born between 1981 and 1996.

2 Millennials are reportedly twice as likely than other investors to invest in companies with significant positive social or environmental impacts (Morgan Stanley 2017).

3 In the 2022 Transparency International Survey, Finland ranked as the second least corrupt country.

4 Within the equity savings account, investors will be able to trade in shares of both Finnish and foreign companies listed on a stock exchange up to €50,000 without incurring any direct taxes (Finnish Tax Administration 2022).

5 Their database does not cover indirect shareholdings such as the holdings of investment companies owned by single individuals or individuals’ indirect ownership through mutual funds.

6 The survey questions are available upon request from the authors.

7 In this section, we do define traditional, ethical and sustainable investing.

8 The survey questions are available upon request from the authors.

9 Nordnet (2021) reports that 62% of their customers are men, 36% women and 2% companies. The largest customer segment is 26–35-year-old private investors (28%). In total, 70% of the customers own stocks and 55% own shares of at least one fund.

10 In addition, a collaboration with a market research agency was also considered. The agency would, however, contact random individuals and many of them might not be investors nor interested in investing. This option was abandoned due to a low efficiency and a high cost. A collaboration with a traditional bank was also abandoned due to the tight GDPR and bank privacy regulations.

11 This forbids storing respondents’ contact details.

12 The contact details of the people participating to the raffle cannot be linked to the survey responses.

13 Results are available upon request.

14 Source: https://www.statista.com/statistics/1155008/average-age-of-population-by-gender-finland/.

15 Source: https://stat.fi/en/statistics/pra.

16 Results are available upon request from the authors.

17 Results are available upon request from the authors.

18 Results are available upon request from the authors.

19 ‘Hundreds of Funds to be Stripped of ESG Ratings’, Steve Johnson, Financial Times, 24 March 2023.

Additional information

Funding

We gratefully acknowledge funding from Foundation for Economic Education [grant number 16-9000].

Notes on contributors

Bonnie Buchanan

Bonnie Buchanan is a professor of finance and the director of the Sustainable and Explainable FinTech (SAEF) Center at the Surrey Business School, University of Surrey, UK. Her research interests are in FinTech, sustainability, and international finance. Professor Buchanan has published in journals including the Journal of Corporate Finance, Journal of Business Ethics, American Business Law Journal, Journal of International Financial Markets, Institutions and Money and International Review of Financial Analysis.

Hanna Silvola

Hanna Silvola is an associate professor of accounting at Hanken School of Economics, Finland. Her research interests are in sustainable investing and in measuring, reporting and assuring corporate sustainability information for strategic decision-making. Silvola has published articles in Accounting, Organizations & Society, Management Accounting Research, Journal of Business Ethics and Journal of Management Accounting Review.

Emilia Vähämaa

Emilia Vähämaa is a Wärtsilä Associate Professor of Finance at Hanken School of Economics, Finland. Her research interests and teaching expertise lie in the areas of sustainable finance, ESG, corporate governance, and banking. Emilia has published in the Journal of Business Ethics, Journal of Business Research, and Journal of Financial Services Research. She is a board member of the Nasdaq Nordic Foundation and the OP Group Research Foundation's Scientific Committee.