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Journal of Business Ethics
Published in: Journal of Business Ethics 4/2017

13-10-2015

The Choice Architecture of Sustainable and Responsible Investment: Nudging Investors Toward Ethical Decision-Making

Author: Herwig Pilaj

Published in: Journal of Business Ethics | Issue 4/2017

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Abstract

This paper applies insights from behavioral economics and nudge theory to foster sustainable and responsible investment (SRI). SRI provides an opportunity to express and promote ethical values via choice of financial instruments. While policy-makers have tried to encourage greater participation in SRI, the majority of retail investors retain a conventional approach to investment. I develop a conceptual framework to improve the effectiveness of SRI policy-making. The first part of the framework comprises a transmission mechanism which emphasizes the role of SRI as a driver for sustainable development. The second part is a model of the individual decision for or against SRI. The framework suggests that low SRI demand is a case of behavioral market failure, and that nudging is a suitable tool for dismantling behavioral barriers to SRI. A specific example of smart choice architecture is used to illustrate the framework’s potential in the design of an SRI nudge. Assuming the nudge stands up to the rigors of empirical testing, it may well provide a feasible alternative for policy-makers.
previous article Sources of Stakeholder Salience in the Responsible Investment Movement: Why Do Investors Sign the Principles for Responsible Investment?
next article Is Integrated Reporting Really the Superior Mechanism for the Integration of Ethics into the Core Business Model? An Empirical Analysis

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Metadata
Title
The Choice Architecture of Sustainable and Responsible Investment: Nudging Investors Toward Ethical Decision-Making
Author
Herwig Pilaj
Publication date
13-10-2015
Publisher
Springer Netherlands
Published in
Journal of Business Ethics / Issue 4/2017
Print ISSN: 0167-4544
Electronic ISSN: 1573-0697
DOI
https://doi.org/10.1007/s10551-015-2877-9

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