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

TLDR

Non‑professional investors face complex decisions when incorporating ESG issues into their investment choices. This study investigates which factors influence non‑professional investors’ use of sustainability information and their decision to invest in sustainable companies, adding to research on their perception of such information. Using an online survey of German investors and a structural‑equation‑model framework grounded in behavioral finance and information‑overload theory, the authors examined these influences. Results show that personal sustainability orientation is the strongest driver, with additional effects from emotional identification, willingness to sacrifice returns, information exposure, age, and information overload, and that investors treat ESG as a single, undifferentiated dimension.

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.