Reconciling sustainability preferences and behavior — The case of mutual fund investments

Abstract

This study analyzes the interaction between sustainability preferences and investment behavior, particularly in the context of mutual fund investments. Based on survey data from a representative sample of Swedish mutual fund investors, we observe that while a majority of respondents express a willingness to sacrifice returns for more sustainable investments, only a minority claim to have actively invested in sustainable funds. This highlights a discrepancy between preferences and behavior, which we show can be understood by (in)attentiveness in the financial decision-making process. We reveal that sustainability-motivated investors are less attentive than those motivated by returns, leading to potential misalignment with their preferences. This finding emphasizes the significance of banks taking (in)attentiveness into account when communicating with customers. Information is effective for return-focused investors, while nudges and boosts may better facilitate decisions for sustainability-focused investors.