ESG in investor profiling: what are we talking about?

Abstract

Purpose

Inspired by the groundbreaking novel European regulations on financial investors’ profiling (MiFID II regulation and the ESMA 2022 Guidelines), this paper aims to establish which distinctive socio-demographic traits distinguish investors who declare a generalized interest in all three environmental (E), social (S), and governance (G) pillars and investors who express interest in just one individual pillar or a combination of two pillars.

Design/methodology/approach

Based on a unique dataset of 190 real-world retail investors, this paper aims to create a profile of three types of investor: those whose interest lies in just the environmental pillar, those interested in a combination of the environmental and social pillars, and those interested in all three E, S, and G pillars jointly. Moreover, we try to ascertain whether it is possible to observe statistically significant differences between the different types of investors.

Findings

The results obtained indicate that it is possible to profile investors who are environmentally-oriented and investors who are ESG-oriented. Notably, levels of financial literacy do not influence investor ESG attitudes.

Practical implications

The results obtained may have multifaceted implications for financial advisors, the banking and financial institution industry, and marketing strategists, as well as for further research.

Originality/value

The originality of this paper derives from the responses used in the analysis, which were collected from a sample of real-world retail investors who completed a mandatory MiFID-questionnaire, validated by the Italian Securities and Markets Supervisory Authority. Our paper thus represents a bridge between a theoretical approach and real-world practice.