ESG Rating Divergence and Sustainable Investments

Last registered on September 17, 2024
View Trial History

Pre-Trial

Trial Information

General Information

Title
ESG Rating Divergence and Sustainable Investments
RCT ID
AEARCTR-0014364
Initial registration date
September 13, 2024

Initial registration date is when the trial was registered.

It corresponds to when the registration was submitted to the Registry to be reviewed for publication.

First published
September 17, 2024, 1:46 PM EDT

First published corresponds to when the trial was first made public on the Registry after being reviewed.

Locations

There is information in this trial unavailable to the public. Use the button below to request access.

Request Information

Primary Investigator

Name
Bennet Janssen
Affiliation
University of Mannheim / ZEW
Contact Primary Investigator

Other Primary Investigator(s)

PI Name
Youpeng Zhang
PI Affiliation
University of Mannheim / ZEW
Contact Investigator

Additional Trial Information

Status
In development
Start date
2024-09-23
End date
2024-11-22
Keywords
Behavior, Finance & Microfinance
Additional Keywords
Behavioral Finance, Sustainable Finance, ESG ratings, Uncertainty, Household Finance
JEL code(s)
Secondary IDs
Prior work
This trial does not extend or rely on any prior RCTs.
Abstract
This study investigates how private investors make investment decisions based on sustainability ratings from different rating agencies and whether they react to inconsistencies between these ratings. To explore this, we conduct an investment experiment with German private investors, asking them to allocate money between a conventional and a sustainable fund. Both funds are identical except for the sustainable fund’s sustainability ratings, sourced from different agencies. Participants are exposed to different combinations of sustainability ratings, and the dependent variable is the proportion of money allocated to the sustainable fund. We hypothesize that higher sustainability ratings will tend to increase investments in the sustainable fund, while rating divergence will reduce them. We also aim to examine which investor groups are most sensitive to changes in sustainability ratings and rating inconsistencies.
External Link(s)

Registration Citation

Citation
Janssen, Bennet and Youpeng Zhang. 2024. "ESG Rating Divergence and Sustainable Investments." AEA RCT Registry. September 17. https://doi.org/10.1257/rct.14364-1.0
Sponsors & Partners
Experimental Details

Interventions

Intervention(s)
We explore how private investors react to differing sustainability ratings when making investment decisions. Participants will engage in an investment experiment where they allocate a hypothetical sum (€1,000) between two funds: a conventional fund and a sustainable fund. The sustainable fund will be presented with two sustainability ratings from different rating agencies, reflecting its level of sustainability as well as potential divergence in assessments. Participants will make multiple allocation decisions across different combinations of sustainability ratings. The experiment includes nine distinct combinations of ratings for the sustainable fund, ranging from low (25th percentile) to high (75th percentile) rankings. The ratings of the conventional fund will remain constant throughout. These interventions are designed to test whether and how rating divergence impacts investment in the sustainable fund, alongside other factors like the average sustainability rating.
Intervention Start Date
2024-09-23
Intervention End Date
2024-11-22

Primary Outcomes

Primary Outcomes (end points)
The primary outcome variable of interest is the amount of money invested in the sustainable fund for each combination of sustainability ratings.
Primary Outcomes (explanation)

Secondary Outcomes

Secondary Outcomes (end points)
Secondary Outcomes (explanation)

Experimental Design

Experimental Design
Retail investors complete a survey related to sustainable finance and make hypothetical investment decisions.
Experimental Design Details
Not available
Randomization Method
By computer. The experiment is randomized in several aspects: the order in which participants see the nine distinct rating combinations, the order of the rating agencies displayed, and whether the sustainable or conventional fund is listed first when allocating the investments.
Randomization Unit
Individual
Was the treatment clustered?
No

Experiment Characteristics

Sample size: planned number of clusters
2000 survey respondents.
Sample size: planned number of observations
18000 investment decisions: Each participant makes nine investment decisions.
Sample size (or number of clusters) by treatment arms
2000 as it is a within-subject design.
Minimum detectable effect size for main outcomes (accounting for sample design and clustering)
Supporting Documents and Materials
IRB

Institutional Review Boards (IRBs)

IRB Name
German Association for Experimental Economic Research e.V.
IRB Approval Date
2024-09-06
IRB Approval Number
eK3xs699
Analysis Plan