Why do Crowdinvestors invest? Survey and decision experiment

2021-04-26

2021-05-31

The key choice in the experiment is that between a 25 Euro voucher and a donation to one of 3 organisations g. We determine the willingness to accept the donation over the voucher via a BDM procedure. Thus, for every subject, we elicit WTA_g. The organisations are a carbon offset company, Greenpeace, and the Red Cross.

See the attached pre-analysis plan.

We will recruit active crowdfunders from the platform via email newsletters. The platform is sending regular newsletters, and has conducted a survey of its own before, so this is not unusual.

Subjects will go through a survey and a choice experiment. The order of these two elements is randomized at subject level. The core of the experiment is to elicit a willingness to accept a donation to one of 3 causes (two environmental, one social) over a 25 Euro voucher, which can be used on the homerocket crowdfunding platform. This choice is incentivized, as we will actually give subjects the voucher or make the donation on their behalf, according to their choice.

Since the voucher can only be invested in real estate projects, but not in green projects, the choice between the voucher (similar to cash or higher returns) or the green or social causes tells us what subjects truly care about in an incentivized way.

The donations go to one of three organisations: carbonoffset.com, Greenpeace, or the Red Cross Austria. The first two achieve environmental impact, the last achieves social impact. Thus, if subjects give up the voucher to let us make these donation, then this reveals their preference for environmental or social impact.

As we describe in the pre-analysis plan, these elicited willingnesses to pay then help us determine whether investors invest in green projects for their higher expected returns, their environmental impact, or their social impact.

Randomization is determined by qualtrics' random number procedure.

Subject

No

We aim for 400 completed surveys/experiments, and will send out email newsletter invitations until we reach this number.

We might get slightly more than 400, as qualtrics allows subjects who have started the survey to finish it. Thus, once we stop accepting new responses at 400, those who have already started can still finish.

400 subjects.

400 subjects.

Are investors willing to give up a higher return if the investment generates positive environmental impact? We investigate this question with a decision experiment among crowdfunders, where they choose between a higher return or environmental impact. Overall, 65% of investors choose environmental impact at the expense of a higher return for sufficiently large impact, 14% choose impact independent of the magnitude of impact, while 21% choose the higher return independent of impact. Combining the experimental data with historical investments, we find that investors allocate a larger share of funds to green projects if they value environmental impact more, and if they expect green projects to be more profitable. These findings suggest that investors have a preference for positive environmental impact, and satisfy it by investing in green projects. We further show that the preference for environmental impact is distinct from a preference for positive social impact. Finally, we introduce new survey measures of impact for future use, which are experimentally validated and predict field behavior.

Siemroth, Christoph and Hornuf, Lars, Do retail investors value environmental impact? A lab-in-the-field experiment with crowdfunders (July 14, 2021). Available at SSRN: https://ssrn.com/abstract=3888258

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3888258