Abstract

Although retail investors’ interest in sustainable investment is constantly increasing, German credit unions and co-operative banks offer few sustainable financial products. The purpose of the study is to explore the current gap between supply and demand of sustainable financial investments in German retail banking from a financial advisor’s point of view. We use qualitative analysis of interviews with financial advisors based on a Grounded Theory approach with the aim to identify the key causation in the cause-effect relationship of the supply-demand-discrepancy. Our findings yield two explanations of the discrepancy. First, investment advisors attribute responsibility towards private investors, i.e., they ask for a clear signal whether private investors are interested in sustainable investment. Thereby, we refer to causal and responsibility attribution theory for grasping this phenomenon. Second, investors are risk-averse and therefore reluctant to invest in stocks, which represent the common form of sustainable investment in Germany. Accordingly, we propose risk averseness as a variable moderating the relationship between demand and supply of sustainable investment products within the frame of attribution theory. The study contributes towards the state-of-the-art by proposing an explanation for the mechanisms underlying the advisor-customer-relationship in the context of predominant risk-averse investment culture that currently hamper the expansion of the Socially Responsible Investment (SRI) segment of private investors in Germany. This paper outlines measures for promoting sustainable financial products in Germany, namely, among others, the creation of a more customizable offering of SRI products and the importance to inform customers about sustainable investment opportunities by advisors and banks.

Highlights

  • In recent years, the market for sustainable financial investments has seen constant growth in Germany and the rest of the world [1,2]

  • The purpose of this paper is to explore the discrepancy between supply and demand of sustainable financial products in German retail banking from a financial advisor’s point of view

  • As our research focuses on the market for sustainable financial investments in Germany, we follow the definition of the “Forum für Nachhaltige Geldanlagen e.V.” (FNG), the German subsidiary of the European Sustainable and Responsible Investment Forum (Eurosif): Sustainable investment is the general term for sustainable, responsible, ethical, social, ecological investment and all other investment processes that incorporate the impact of ESG criteria in their financial analysis

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Summary

Introduction

The market for sustainable financial investments has seen constant growth in Germany and the rest of the world [1,2]. The main drivers of this development are institutional investors, but the market for private investors plays an increasingly important role in this development [2]. Supply and demand for sustainable investments in Germany still lags behind markets such as the USA [3,4]. Private investors are increasingly becoming interested in sustainable financial products that take ecological, social, and ethical aspects into account. Sustainable financial products still play a subordinate role in conventional banks in Germany. The niche of sustainable investment is dominated by specialized sustainability banks [2,5,6]

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