Believe it or not: Energy and Investor Preferences

Lou Wander
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Lou Wander: LEDa - Laboratoire d'Economie de Dauphine - IRD - Institut de Recherche pour le Développement - Université Paris Dauphine-PSL - PSL - Université Paris Sciences et Lettres - CNRS - Centre National de la Recherche Scientifique, Chaire économie du climat - CEC - Chaire économie du climat

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Abstract: Ten years after the Paris Agreement, many financial institutions have pledged to achieve carbon neutrality by 2050, yet private capital continues to flow to fossil fuel-related activities. While prior literature has documented sustainable preferences at the fund level, little is known about how professional investors select individual firms within carbon-intensive sectors. In particular, there is limited evidence on whether investors reward fossil fuel firms' transition efforts when allocating capital. This paper addresses this question through a survey of 152 professional investors, most of whom are employed by European asset management companies. Respondents participate in a portfolio allocation experiment in the energy sector, analysed using a Multiple Discrete-Continuous Extreme Value (MDCEV) model. The results reveal a predominant label effect: investors systematically favour the renewable energy firm while continuing to allocate capital to firms that generate revenue from fossil fuel activities. We find no robust evidence that transition-related indicators, including low-carbon capex and decarbonisation plans, affect investment decisions involving fossil fuel-related firms. These findings suggest that green preferences coexist with continued exposure to fossil fuels, although the restricted sample size may have limited the detection of more granular attribute effects.

Keywords: Green Finance; Multiple Discrete-Continuous Choice Experiment (MDCEV); Low-carbon capex; Fossil Fuels; Professional Investors (search for similar items in EconPapers)
Date: 2026-05
Note: View the original document on HAL open archive server: https://hal.science/hal-05357599v2
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