In partnership with JGU and BMBF | 22 Sep 2023
Investment behaviour in sustainable finance
Economic Consulting Team
Oxford Economics
To meet the 2050 climate targets, the global sustainability and climate goals will require massive public and private investments of more than 131 trillion euros. The transformation of the financial system towards sustainability is a prerequisite for achieving global goals such as the Paris Climate Agreement. To gain new insights for policymakers and the financial sector into the functioning and effects of sustainable investments by small retail investors, Oxford Economics and the Johannes Gutenberg-University Mainz are jointly working on the project “Investment behaviour in sustainable financial instruments: A Behavioural Experimental Analysis of ‘ESG Preferences’ and their Implications for Financial Institutions and Policy” (ESGInvest). ESGInvest is one of 14 research projects funded by the Bundesministerium für Bildung und Forschung (BMBF) under the funding measure “Climate Protection and Finance” (KlimFi) running from 2022 to 2026, with a total funding volume of around 11 million euros. This two-year research project aims to provide a better understanding of both the direct sustainable investment preferences of retail investors and their indirect effects on the lending behaviour of financial institutions.
A sustainable financial system creates incentives to mitigate climate risks and limit global warming to 1.5°C, and triggers innovations needed to reverse the effects of climate change. The Paris Agreement also made the transformation towards a sustainable financial system a central concern of global policymaking. From a policy perspective, it is crucial to understand the preferences of retail investors regarding sustainable investments so that they can contribute to the achievement of the Paris Agreement. Because only then can requirements for policy frameworks and financial products be developed that will effectively steer retail investment toward sustainable development in the long term.
Our project assesses the extent to which demand pressure from retail investors can help to effectively achieve more climate-friendly investments and what helpful measures to improve market transparency in this area might look like. To this end, we will examine the sustainable investment demand of retail investors in a cross-national field experiment considering various influencing factors. We will then analyse whether there are systematic differences between the considered countries. In addition, we will examine whether the sustainable preferences of retail investors can influence banks’ lending behaviour. Finally, we will combine existing findings on the challenges of increasing demand for sustainable financial products with our new findings on retail investors’ preferences and bank lending behaviour to identify a process to establish a stronger commitment to sustainability that engages all the relevant actors.
This research project is being carried out in cooperation with:
Johannes Gutenberg Universität Mainz durchgefüht
Bundesministerium für Bildung und Forschung (BMBF)
The experts behind the research
Our Economic Consulting team are world leaders in quantitative economic analysis, working with clients around the globe and across sectors to build models, forecast markets and evaluate interventions using state-of-the art techniques. The lead consultants on this project were:
Johanna Neuhoff
Associate Director of Consulting
Hannah Zick
Economist
Jan Sun
Senior Economist
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