Misconceptions about socially responsible investments

Socially responsible investment (SRI) suffers from a lack of investment from individuals and has for the past 30 years been driven mainly by professional investors. We underline that on average, individuals from the UK (n=560) and the US (n=472) have four misconceptions about SRI investments: (i) SRI investments underperform classical ones (ii) SRI investments are shunned by wall street investors(iii) The idea of SRI emerged 5 years ago (iv) SRI requires higher management fees. We show that such misconceptions are linked to a lower propensity to have invested in SRI. We further show that in the US, misconceptions about SRI are related to lower financial literacy scores. We thus call for boosts in the form of education programs, in addition to nudges already proposed in the literature, in order to promote SRI.

Automated summary

Individuals have misconceptions about socially responsible investment, which hinder its development. Education and nudges are needed to promote SRI.