Who Cares about Investing Responsibly? Attitudes and Financial Decisions

The aim of this paper is twofold. Firstly, we investigate the determinants of individual's attitudes towards investing responsibly, based upon Environmental, Social, and Governance (ESG) considerations. Secondly, we look at how important ESG considerations are, over and above socio-economic characteristics including financial literacy and risk attitudes, in explaining whether individuals hold shares and/or equity, and the amount invested in financial assets. Using the UK Financial Lives Survey data which is collected by the Financial Conduct Authority, our analysis reveals that, firstly, individual characteristics have little explanatory power in terms of explaining responsible investments, except for: education; gender; age; and financial literacy. Secondly, those individuals who are interested in future responsible investments are approximately 7 percentage points more likely to hold shares/equity, and have around 77% more money invested in financial assets (i.e. just under twice the amount). We also undertake several sensitivity checks including the role of selection on unobservables and the extent to which the exogeneity assumption regarding interest in future responsible investments can be relaxed, as well as matching estimation techniques to move beyond mere statistical associations.