How can we know if investors are coherently linking sustainability concepts?

Dane P. Rook

Journal of Sustainable Finance & Investment, 2012, vol. 2, issue 3-4, 198-221

Abstract: The influences of sustainability factors on long-term financial market dynamics are complex. Investors’ abilities to coherently link sustainability concepts from across diverse domains may dictate success in navigating long-term complexities. A coherent understanding can avoid unintended consequences and mitigate governance conflicts for institutional investors. Analysis of whether investors are coherently linking sustainability concepts presents an underexplored empirical challenge for both psychology and finance. This article presents a methodology for measuring how coherently investors link sustainability concepts. The approach uses the concept of investment beliefs and straightforward mathematical techniques on a unique small-sample dataset of the self-reported investment beliefs of senior asset managers on sustainable investments and long-termism. Three findings emerge. First, investors are able to successfully link small numbers of sustainability concepts in a coherent way, but have difficulty doing so for larger numbers of concepts. Second, expert investors seem to be making global linkages among sustainable investment concepts from different domains (global linkages) and thus may be cultivating broad worldviews on sustainability. Third, some sustainability concepts link together more coherently for investors than others. This article advocates further research into the coherence of sustainable investment understanding, as well as a scrutiny by investors of their own investment belief systems.

Date: 2012
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DOI: 10.1080/20430795.2012.742634

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