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HomePaperRich and Responsible: Is ESG a Luxury Good?

Rich and Responsible: Is ESG a Luxury Good?

25 February 2024
Authors: Steffen Andersen (Copenhagen Business School), Dmitry Chebotarev (Indiana University), Fatima Zahra Filali Adib (Copenhagen Business School) and Kasper Meisner Nielsen (Copenhagen Business School)
Presenter: Steffen Andersen (Copenhagen Business School)
Abstract:

We study whether investors perceive responsible investments (i.e., investments in assets with environmental or social benefits) as a luxury good. We exploit windfall wealth due to inheritances from parental deaths to obtain plausibly exogenous variation in wealth. We show that windfall wealth increases the likelihood of holding responsible mutual funds and green stocks. Our findings indicate that both supply factors (e.g., bank advice) and demand factors (e.g., preferences) play a role in shaping allocations to responsible investments. Notably, beneficiaries with a history of charitable donations exhibit a stronger response, emphasizing the influence of a ‘warm glow’ effect on portfolio formation.

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