S(k)in in the game: Investing Responsibly in the Face of Risk

Abstract

This letter deals with responsible decision making: Will model presence and risk influence investment in socially responsible funds? We conducted a choice-based experiment in which participants were invited to allocate their portfolio across three investments: a socially responsible fund, a sin fund or a safe account. The risk of the SRI and sin fund was manipulated across treatment (high or low), as well as the presence of a model face (woman, man or without). We find that SRI choice was positively influenced by the presence of a masculine face. A higher level of risk of the sin fund relative to the SRI one favors greater investment in SRI. On the opposite, a higher level of risk of the SRI relative to the sin fund reduces investment in SRI, apart for highly ethically-minded consumers, who invest in SRI and shun sin stock without consideration for risk.