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Behavioural impediments to sustainable investment.

Conference paper
Authors Tommy Gärling
Maria Andersson
Anders Biel
Magnus Jansson
Published in Paper presented at the 16th annual conference of European Association of Environmental and Resource Economists (EARE), University of Gothenburg, Göteborg, Sweden.
Publication year 2008
Published at Department of Psychology
Language en
Keywords Sustainable investments, norms, impediments, incentives
Subject categories Psychology

Abstract

Institutional investors are large and powerful owners of corporate equity and have, through their investment decisions, the potential to influence company behaviour in a more sustainable direction. How can institutional investors be influenced? There are many obstacles to overcome before such influences will become more widespread. The present study investigates impediments to sustainable investment (SI) that reside within and between organizations of institutional investors. A questionnaire was addressed to 37 institutional fund companies with board directors, senior investment managers, and portfolio managers acting as respondents. A main impediment within the organizations is that top and portfolio management differs in their view on SI. Although they have similar beliefs about short- and long-term returns of SI funds, top management has a more positive view on intangibles associated with SI. This includes to what extent one believes that members of the own organization support a norm that SI should be implemented and that the share of SI in the own company will increase in the future. The main impediment to SI practice may also be traced to incentives and rules that through imitation are adopted across organisations, potentially underlying the frequently observed herding behaviour among institutional investors. We therefore also present evidence for the hypothesis that herding is caused by interdependence between institutional investors, for instance, that leading investors or a critical mass of investors influence many others to follow suit.

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