CEPS: Can responsible investing encourage retail investors to invest in equities?

23 March 2021

The low participation of retail investors in the equity market is a concern for many countries. It is a necessary condition for the development of capital markets in Europe and a key factor for funding post-Covid economic recovery.

 Recently, savers’ appetites for responsible investment has grown, but little is known about the consequences of this development on individual investment decisions.

Employee savings plans constitute a unique laboratory for studying these choices. In a recent research article (Brière and Ramelli, 2021), the impact of introducing responsible funds into the investment choices of more than 900,000 French employees was analysed. The addition of a responsible option to the menu of funds led to a 7% increase in the equity allocation of new investments. Given that the average equity allocation is around 13%, this increase is substantial and represents an encouraging result for retail investors’ participation in the equity market. The role of social preferences further explains this phenomenon.

full report at CEPS

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