How Environmental Attributes Shape Return and Risk Sensitivities in Portfolio Choices

Sébastien Duchêne (), Adrien Nguyen-Huu, Dimitri Dubois () and Marc Willinger
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Sébastien Duchêne: Groupe Sup de Co Montpellier (GSCM) - Montpellier Business School
Dimitri Dubois: CEE-M - Centre d'Economie de l'Environnement - Montpellier - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement - Institut Agro Montpellier - Institut Agro - Institut national d'enseignement supérieur pour l'agriculture, l'alimentation et l'environnement - UM - Université de Montpellier

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Abstract: This paper investigates how financial return, risk, and environmental impact jointly shape portfolio choices in a lab-in-the-field experiment with more than 15,000 portfolio choices made by finance professionals and university students. Participants repeatedly allocated budgets between green, neutral or brown assets differing in expected return, risk. Asset color referred to environmental externalities which were modeled as real donations to a pro-environmental NGO (green) or to a fossil fuel association (brown). Three robust findings emerge. First, environmental framing modifies financial sensitivities: participants respond more strongly to return changes in greener assets, while their responsiveness to risk does not differ by asset color. In high-risk contexts, portfolios shift toward higher-return brown assets, showing that standard return–risk trade-offs dominate when financial uncertainty rises. Second, preferences are asymmetric: aversion to brown assets dominates attraction to green ones, consistent with loss aversion and negativity bias. Third, both professionals and students exhibit pro-environmental tendencies, but for different reasons: professionals' choices reflect job roles and trading strategies, while students' allocations relate more to pro-social and environmental attitudes and respond more strongly to pecuniary and non-pecuniary incentives.

Keywords: Sustainable finance; Portfolio Choice; Experimental finance (search for similar items in EconPapers)
Date: 2025-10-07
New Economics Papers: this item is included in nep-agr, nep-env and nep-exp
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