Does Reframing Fund Carbon Emissions to Increase Their Personal Relevance Boost Investment in Sustainable Funds? Evidence from a Discrete Choice Conjoint Experimental Design

Abstract

The market for green investments can be expanded by providing investors with clear information about the environmental impact of their investment options. Using a discrete choice conjoint experimental design with retail investors (Nchoices=20,874, N=499), we investigate the impact of presenting environmental information in different formats on investment decisions. Drawing on psychological theories of attention and information processing, we test whether reframing the presentation of a fund’s carbon emissions to make them more personally relevant and easier to evaluate leads to increased investment in more sustainable funds. We compare the effectiveness of visual and numeric carbon labels, designed to improve the clarity and comparability of emissions, with analogies equating fund emissions to everyday activities such as cooking, commuting, and watching Netflix, which aim to increase the personal relevance of emissions. We find that, contrary to our predictions, carbon emission labels outperformed analogies in increasing green investment choices.