Influences for using sustainability information in the investment decision-making of non-professional investors

ABSTRACT

Non-professional investors face a series of complex decisions when considering environmental, social and governance (ESG) issues for their investment activities. As such, this study sheds light on the question: what influences the use of sustainable information and the decision to invest in a sustainable company by non-professional investors? In order to answer the question, this article builds on the behavioral finance and information overload literature. We used an online survey carried out in Germany and applied a structural equation model. The results show that the personal orientation toward sustainability issues is the most important factor in deciding to use a company’s sustainability information. Furthermore, the study reveals that the decision to invest in a sustainable company is influenced by the personal sustainability orientation, identification induced by a good feeling, their willingness to waive returns for sustainability, their exposure to sustainability information, the investor’s age and information overload. The results show that non-professional investors do not distinguish between the different aspects of sustainability, that is, ESG. The study contributes to research which explores decision-making of non-professional investors, specifically their perception of sustainability information. It identifies factors influencing the use of sustainability information and the decision to invest in sustainable companies.

KEYWORDS:

• sustainable investment
• SRI
• ESG
• private investor
• structural equation model
• CSR

Acknowledgements

We thank the two anonymous reviewers and the associate editor for their valuable comments. This paper is based on the dissertation written in German as a monograph and published as Hafenstein, Andrea. 2016. ‘Nachhaltigkeitsinformationen in der Anlageentscheidung – Eine Analyse der nicht-professionellen Anleger’ (Sustainability Information in the Investment Decision – An Analysis of Non-Professional Investors), Wiesbaden: Gabler Verlag.

Notes on contributors

Andrea Hafenstein is specialist for business management at the AGA Unternehmensverband, an employer’ association in Northern Germany in the wholesale and foreign trade sector as well as company-related services. Before this, she was a Ph.D. student at the chair of capital markets at the University of Hamburg, Faculty of Business, Economics and Social Science, Germany. She holds a Master’s degree in Business Administration and a Master of Business Law and Economic Law (LL. M. oec.) from the Martin-Luther-University Halle-Wittenberg and a Ph.D. from the University of Hamburg.

Alexander Bassen is professor of capital markets and management at the University of Hamburg, Faculty of Business, Economics and Social Science, Germany. He holds a Master's degree from the University of Tübingen and doctoral degrees (Ph.D. and German Habilitation) from the European Business School (Oestrich-Winkel) and the Technical University of Munich in Germany. He is a member of the German Council for Sustainable Development – advisory body of the German Federal Government, co-chair of the UN PRI Academic Network Steering Committee, head of the corporate governance commission and the investor relations commission of the Society of Investment Professionals Germany (DVFA), member of the Commission on Environmental, Social & Governance Issues (CESG) of the European Association of Financial Analysts Societies (EFFAS), and member of the advisory panel for sustainability of Deutsche Asset and Wealth Management (Deutsche Bank).

Notes

1. Non-professional investors do not invest in a professional context and by occupational reasons (Anderson 1988).

2. For the remainder of this paper, sustainable investment refers to the investment in companies which behave in a sustainable manner.

3. The CFA is a special form of SEM (described later in more detail).

4. We examined the mediation with the help of bootstrapping (Nevitt and Hancock 2001). The sample is sufficient for bootstrapping (Nevitt and Hancock 2001).