Saving for Sustainability: What factors affect decisions to invest sustainably?

Project Description

"Financial markets can play a major role in redirecting capital towards more sustainable business practices, to meet the goals specified in the 2015 Paris Agreement. Large institutional investors such as pension funds can materially affect the valuation of a firm’s environmental performance through their capital allocation decisions, and therefore it is of crucial importance to analyse the factors that affect those investment decisions.

The aim of INVESTGREEN is to contribute to the urgent challenge of climate change mitigation and adaptation by advancing the understanding of the factors that motivate or deter increased allocation of pension fund investments to more sustainable investments. The standard definitions and measurement of risk and return used in financial theory need to be urgently redefined to incorporate individual, environmental and societal goals rather than the narrow constructs of relative and absolute financial performance. This project will advance our scientific understanding of the extent to which investors identify a link between their investment allocation decisions and environmental degradation, and the impact that these decisions will have on their long term liabilities which will be materially affected by increased environmental degradation, natural disasters, extreme temperatures, loss of marine resources, loss of biodiversity and ecosystems and increased pollution.

The project’s major scientific contribution will be to develop a comprehensive and evidence-based conceptual framework of the factors that affect the knowledge, attitudes and values that shape investment decision-making in the context of pension saving allocation to more sustainable investments. This conceptual framework will be tested to examine whether suggestive guidance and information can alter investment decision making, and affect the allocation of pension investments to more sustainable investments to match the long-term liabilities of the investors."