Household preferences for socially responsible investments

Abstract

We analyze revealed and stated household preferences for socially responsible investments (SRI). Using a questionnaire specifically designed for this purpose and administered to a Dutch representative household panel, we investigate the actual and latent demand for SRI products. Respondents reported whether they owned SRI products, the reason behind this decision, but also answered stated choice questions on traditional investments and hypothetical SR products with an explicit return penalty and/or an in-kind compensation. Our results show that social investors are willing to pay a price to be socially responsible rather than needing a little nudge, such as a gift (a book or a voucher). Highly educated individuals have a substantial latent demand that is currently unexploited. Keeping education constant, individuals who consider themselves financially literate are less interested in SR products than others. Particularly at the intensive margin, the stated demand for SRI funds is sensitive to the return penalty.