Understanding Retail Investor Behaviour in Sustainable Investing
Olander, Mia (2024)
2024
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Julkaisun pysyvä osoite on
https://urn.fi/URN:NBN:fi:amk-2024112129201
https://urn.fi/URN:NBN:fi:amk-2024112129201
Tiivistelmä
This bachelor's thesis examines the psychological and informational factors influencing retail investors' behaviour in sustainable investing. The research investigates how individual attitudes towards Environmental, Social, and Governance (ESG) factors shape investment decisions, with a focus on the barriers and motivations influencing retail investors in Finland.
The theoretical framework guiding this research draws from established concepts in sustainable investing, such as sustainable investment methods, and from investor behaviour, such as traditional finance theory, behavioural finance theory, and decision-making models. Traditional finance theory emphasizes maximizing financial returns and minimizing risk. In contrast, behavioural finance theory offers insights into the psychological biases that can affect investment behaviour. Decision-making models are employed to understand how investors weigh various factors in their decision-making process.
The empirical part of the thesis was carried out as a quantitative study using a survey aimed at retail investors with experience in sustainable products. The data collection process involved an analysis of the responses from the survey, which provided insights into the complex decision-making processes faced by retail investors when evaluating sustainable investment opportunities.
The findings from the empirical section reveal that, while many investors acknowledge the societal and environmental impact of sustainable investments, they are often deterred by perceived financial risks, lack of accessible information, and concerns about the reliability of ESG claims. The study also shows that while some investors are willing to accept lower returns in exchange for sustainability, the majority prioritize financial performance in their investment decisions.
These findings align with traditional finance theory, which suggests that financial returns are typically the most important consideration for investors, but also reveal the influence of behavioural factors, such as investor perception of ESG risk and the desire for ethical alignment. However, the results also show that many investors are motivated by the long-term impact of sustainable investments and are open to investing more if barriers, particularly in transparency and performance, were addressed.
The theoretical framework guiding this research draws from established concepts in sustainable investing, such as sustainable investment methods, and from investor behaviour, such as traditional finance theory, behavioural finance theory, and decision-making models. Traditional finance theory emphasizes maximizing financial returns and minimizing risk. In contrast, behavioural finance theory offers insights into the psychological biases that can affect investment behaviour. Decision-making models are employed to understand how investors weigh various factors in their decision-making process.
The empirical part of the thesis was carried out as a quantitative study using a survey aimed at retail investors with experience in sustainable products. The data collection process involved an analysis of the responses from the survey, which provided insights into the complex decision-making processes faced by retail investors when evaluating sustainable investment opportunities.
The findings from the empirical section reveal that, while many investors acknowledge the societal and environmental impact of sustainable investments, they are often deterred by perceived financial risks, lack of accessible information, and concerns about the reliability of ESG claims. The study also shows that while some investors are willing to accept lower returns in exchange for sustainability, the majority prioritize financial performance in their investment decisions.
These findings align with traditional finance theory, which suggests that financial returns are typically the most important consideration for investors, but also reveal the influence of behavioural factors, such as investor perception of ESG risk and the desire for ethical alignment. However, the results also show that many investors are motivated by the long-term impact of sustainable investments and are open to investing more if barriers, particularly in transparency and performance, were addressed.