Wealthy Private Investors and Socially Responsible Investing: The Influence of Reference Groups

David Risi,Falko Paetzold,Anne Kellers

doi:10.3390/su132212931

Abstract

Sustainable development requires a shift from traditionally invested assets to socially responsible investing (SRI), bringing together financial profits and social welfare. Private high-net-worth individuals (HNWIs) are critical for this shift as they control nearly half of global wealth. While we know little about HNWIs’ investment behavior, reference group theory suggests that their SRI engagement is influenced by their identification with and comparison to reference groups. We thus ask: how do reference groups influence the investment behavior of SRI-oriented HNWIs? To answer this question, we analyzed a unique qualitative data set of 55 semi-structured interviews with SRI-oriented HNWIs and industry experts. Our qualitative research found that, on the one hand, the family serves as a normative reference group that upholds the economic profit motive and directly shapes HNWIs to make financial gains from their investments at the expense of social welfare. On the other hand, fellow SRI-oriented HNWIs serve as a comparative reference group that does not impose any concrete requirements on social welfare performance, indirectly influencing SRI-oriented HNWIs to subordinate social concerns to financial profits. Our scholarly insights contribute to the SRI literature, reference group theory, and practice.

Highlights

A shift from traditionally invested assets to socially responsible investing (SRI), broadly defined as the integration of environmental, social, and governance (ESG) considerations into investment practices, is a crucial driver of sustainable development [1].Millionaires and billionaires, i.e., private high-net-worth individuals (HNWIs), hold a vital role in this shift
Fellow SRI-oriented HNWIs serve as a comparative reference group that places little emphasis on accountability for social issues and indirectly influences SRI-oriented
Other SRI-oriented HNWIs serve as a comparative reference group that shares the same values but does not impose any concrete requirements on social welfare performance

Summary

Introduction

A shift from traditionally invested assets to socially responsible investing (SRI), broadly defined as the integration of environmental, social, and governance (ESG) considerations into investment practices, is a crucial driver of sustainable development [1].Millionaires and billionaires, i.e., private high-net-worth individuals (HNWIs), hold a vital role in this shift. The United Nations calculated that investments of USD2.5 trillion per year are missing to finance sustainable development [2]. It is crucial to understand the investment behaviors of HNWIs to mobilize this substantial source of capital for sustainable development. To understand whether private investors engage in SRI, the literature tends to put a higher emphasis on proving the financial profitability of SRI (see [4,5,6]) than, for example, its positive impact on social welfare [7,8]. The profitability debate around SRI only partially solves the issue of knowing little about sustainable investors [16,17] and SRI-oriented HNWIs [18,19].

Objectives

Methods

Results

Discussion

Conclusion