A new study has found that three-quarters of Dutch investors are willing to give up a portion of their pension income if it means their investments are in line with their environmental and social values.
However, the research, which was conducted by Arian Borgers and Rachel Pownall of Tilburg University in the Netherlands, also found some inconsistencies in the way investors make financial decisions. Over a third of survey respondents reported inconsistencies and the authors linked this to low levels of financial understanding.
The report says, “We [found] a significant variation in stated preferences towards proposed social investment screens. Although individuals are able to express their preferences towards social investment criteria, they are not able to translate these values into investment decisions consistently.”
The study used information from research institute CentERdata about Dutch households and aimed to measure to what extent individuals value social responsibility in their pension funds
Sustainable and responsible investment is becoming more mainstream because people are increasingly buying products that are Fairtrade-certified or organic, and transferring this to their investment patterns and financial decisions, according to the research.
Whilst in many places, sustainable and responsible investment often means excluding sin companies – such as those operating in the alcohol, tobacco and gambling industries – from pension funds, the research showed a different approach for the Dutch.
Survey respondents deemed the exclusion of human rights offenders and the weapons industry as more important than other types of exclusionary screens. In contrast to the US and UK, Dutch investors cared the least about investing in the alcohol industry.
The report argues that institutional investors are investing billions of dollars on behalf of investors whilst knowing little about their social values.
Aligning the interests of portfolio managers and values of investors can become “extremely difficult”, the authors noted. However, they agree that these difficulties cannot be an argument to refrain from taking environmental and social preferences into account.