Investors back the environment over profits new research shows

Investors are willing to back climate change action with their own money even if it means sacrificing their profits – according to researchers at the University of Essex.

The study into crowdfunding investment platforms has found that almost 80% of the 400 investors who responded to the survey were willing to let some profit go if the environmental benefit was large enough.

Dr Christoph Siemroth, Senior Lecturer in the Department of Economics, said: “This is a surprisingly high percentage and indicates that the public would be willing to voluntarily back climate action with their wallets.

“This could go some way to explain why electric vehicle manufacturer Tesla’s stock price has surged to such heights in recent years. Even if the stock seems expensive by traditional standards, enough people are still happy to buy because of the perceived environmental benefits.”

The recently published study surveyed a sample of retail investors, who invest their own savings. They were given the choice between investments with higher returns or giving up some returns and helping the environment by offsetting carbon emissions.

In a follow-up question, the investors were surveyed on support for social causes against profit. For example, deciding between an investment in a profitable defence firm or a less profitable social housing property firm. The researchers found that some backers chose a less profitable socially responsible investment at a lower return, but not at the high level of climate-saving projects.

Professor Lars Hornuf, co-author from the Technical University of Dresden, said: “Traditional financial theory expects investors to care only about higher financial returns and lower risks, not about non-financial outcomes.

“But instead we found that a significant number are just as concerned about more than the financial consequences of their investment: They want their investment to make a difference.”

Dr Siemroth concludes: “Our research indicates that retail investors value the environmental benefits in their investment choices.

“This is good news for the environment and the government budget. Since investors are interested in positive environmental impact, the funds needed for green tech, green infrastructure, etc could benefit from private investment, and so lower the burden on the public purse.”