Socially responsible investments (SRI) suffer from a lack of investments from individual investors, despite their positive attitudes toward SRI. This attitude–behavior gap is a serious issue, as SRI is often perceived as a way to promote sustainable development. We investigate nudges, especially the default option, as a way to encourage SRI. In a pre-registered study conducted in October 2021 with 1050 US investors, we pit four nudges against one another to encourage individual investors to invest in SRI. All nudges significantly (...) increased investment in SRI compared with the control group. Making SRI the default option with frictions to opt-out is the most efficient intervention. This is closely followed by a default option without friction to opt out and option partitioning, which are not significantly different from each other. Precommitment, although statistically significant, has a modest effect on investment in SRI and is inferior to the other nudges. Overall, the two types of default as well as option partitioning are significant and impactful solutions for increasing investment in SRI. (shrink)

We introduce nudges in order to incite investors to choose Socially Responsible Investment funds instead of traditional funds. We have set up two online experiments with a total of 713 US retail investors, using three types of nudges to elicit their effects on investors’ SRI investments level: making SRI the default investment, introducing a SRI explanation message, and priming ethical values by displaying shocking images. Making SRI the default option is the most efficient nudge to influence investors towards SRI. Its (...) effect is twofold. First, around 50% of investors do not opt-out of the default allocation. Second, even investors who opt-out of the default allocation invest more in SRI than those in the control group, an effect that appears driven by anchoring. Although investors subjected to both priming and message content marginally increase their SRI investment, priming or message content in isolation appears to have a non-significant influence. For choice architects who want to steer retail investors towards SRI funds, making them the default option appears to be the most powerful nudge. (shrink)

We investigate whether the display of portfolio performance as coming from one large portfolio or two smaller subportfolios matters to individuals and whether prospect theory can explain this preference. To this end, we run a large survey experiment of 3267 individuals in 5 European countries presenting an identical overall return as coming from one portfolio or two smaller subportfolios to individuals. We also elicited the coefficients of the prospect theory value function through price list lotteries. In losses, following prospect theory (...) and mental accounting predictions, we observe emprically a preference for the display of returns as coming from 2 subportfolios, one displaying a small gain and the other a large loss, over a unique portfolio displaying the aggregated resulting loss. As expected, for an overall gain, individuals favor one portfolio over two subportfolios, one displaying a small loss and the other a larger gain. The shape of the value function does not explain individuals’ preferences. The reference point seems to be the main factor involved in explaining individuals’ choice of two subportfolio presentations of the outcome. (shrink)