IDEAS home Printed from https://ideas.repec.org/p/zbw/cfswop/334519.html

Shaping the compass? How sustainability preference elicitation guides investor demand

Author

Listed:
  • Brühl, Volker
  • Radetzky, Marie-Therèse
  • Stolper, Oscar

Abstract

This study evaluates the effectiveness of MiFID II's mandatory elicitation of retail investors' sustainability preferences in aligning investment advice with EU climate goals. Using comprehensive real-world data from 18,250 advisory meetings at a German savings bank, we analyze how clients' expressed ESG preferences influence advisory recommendations and actual investment behavior. Despite regulatory intent, the share of clients stating sustainability preferences declined significantly after mandatory implementation, and expressed preferences rarely translated into changed investment decisions. Our findings reveal a gap between regulatory frameworks and client engagement, highlighting challenges in operationalizing sustainability preferences. We discuss these results alongside ESMA stakeholder feedback and propose practical improvements to enhance alignment and impact.

Suggested Citation

  • Brühl, Volker & Radetzky, Marie-Therèse & Stolper, Oscar, 2025. "Shaping the compass? How sustainability preference elicitation guides investor demand," CFS Working Paper Series 737, Center for Financial Studies (CFS).
    • Handle: RePEc:zbw:cfswop:334519
    DOI: 10.2139/ssrn.5932054
    as

    Download full text from publisher

    File URL: https://www.econstor.eu/bitstream/10419/334519/1/1947740865.pdf
    Download Restriction: no
    File URL: https://libkey.io/10.2139/ssrn.5932054?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Stephen Foerster & Juhani T. Linnainmaa & Brian T. Melzer & Alessandro Previtero, 2017. "Retail Financial Advice: Does One Size Fit All?," Journal of Finance, American Finance Association, vol. 72(4), pages 1441-1482, August.
    2. Arno Riedl & Paul Smeets, 2017. "Why Do Investors Hold Socially Responsible Mutual Funds?," Journal of Finance, American Finance Association, vol. 72(6), pages 2505-2550, December.
    3. Florian Heeb & Julian F Kölbel & Falko Paetzold & Stefan Zeisberger, 2023. "Do Investors Care about Impact?," The Review of Financial Studies, Society for Financial Studies, vol. 36(5), pages 1737-1787.
    4. Gutsche, Gunnar & Wetzel, Heike & Ziegler, Andreas, 2023. "Determinants of individual sustainable investment behavior - A framed field experiment," Journal of Economic Behavior & Organization, Elsevier, vol. 209(C), pages 491-508.
    5. Daniel Hoechle & Stefan Ruenzi & Nic Schaub & Markus Schmid, 2017. "The Impact of Financial Advice on Trade Performance and Behavioral Biases," Review of Finance, European Finance Association, vol. 21(2), pages 871-910.
    6. Roland Bénabou & Jean Tirole, 2010. "Individual and Corporate Social Responsibility," Economica, London School of Economics and Political Science, vol. 77(305), pages 1-19, January.
    7. Sendhil Mullainathan & Markus Noeth & Antoinette Schoar, 2012. "The Market for Financial Advice: An Audit Study," NBER Working Papers 17929, National Bureau of Economic Research, Inc.
    8. Gunnar Gutsche & Bernhard Zwergel, 2020. "Investment Barriers and Labeling Schemes for Socially Responsible Investments," Schmalenbach Business Review, Springer;Schmalenbach-Gesellschaft, vol. 72(2), pages 111-157, April.
    9. Juhani T. Linnainmaa & Brian T. Melzer & Alessandro Previtero, 2021. "The Misguided Beliefs of Financial Advisors," Journal of Finance, American Finance Association, vol. 76(2), pages 587-621, April.
    10. Andersson, Malin & Köhler-Ulbrich, Petra & Nerlich, Carolin, 2025. "Green investment needs in the EU and their funding," Economic Bulletin Articles, European Central Bank, vol. 1.
    11. Roman Kräussl & Tobi Oladiran & Denitsa Stefanova, 2024. "A review on ESG investing: Investors’ expectations, beliefs and perceptions," Journal of Economic Surveys, Wiley Blackwell, vol. 38(2), pages 476-502, April.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Scherer, Bernd & Lehner, Sebastian, 2025. "What drives robo-advice?," Journal of Empirical Finance, Elsevier, vol. 80(C).
    2. Brunen, Ann-Christine & Laubach, Oliver, 2022. "Do sustainable consumers prefer socially responsible investments? A study among the users of robo advisors," Journal of Banking & Finance, Elsevier, vol. 136(C).
    3. Cruciani, Caterina & Gardenal, Gloria & Rigoni, Ugo, 2021. "Trust-formation processes in financial advisors: A structural equation model," The Quarterly Review of Economics and Finance, Elsevier, vol. 82(C), pages 185-199.
    4. Seifert, Marcel & Spitzer, Florian & Haeckl, Simone & Gaudeul, Alexia & Kirchler, Erich & Palan, Stefan & Gangl, Katharina, 2024. "Can information provision and preference elicitation promote ESG investments? Evidence from a large, incentivized online experiment," Journal of Banking & Finance, Elsevier, vol. 161(C).
    5. d’Astous, Philippe & Gemmo, Irina & Michaud, Pierre-Carl, 2024. "The quality of financial advice: What influences recommendations to clients?," Journal of Banking & Finance, Elsevier, vol. 169(C).
    6. Philippe d'Astous & Irina Gemmo & Pierre-Carl Michaud, 2022. "The Quality of Financial Advice: What Influences Client Recommendations?," NBER Working Papers 30205, National Bureau of Economic Research, Inc.
    7. Hervé, Fabrice & Marsat, Sylvain, 2024. "Like daughter, like father: Female socialization and green equity investment," International Review of Financial Analysis, Elsevier, vol. 96(PA).
    8. Janssen, Bennet & Zhang, Youpeng, 2025. "Do retail investors care about ESG ratings?," ZEW Discussion Papers 25-074, ZEW - Leibniz Centre for European Economic Research.
    9. Li, Qianqian & Watts, Edward M. & Zhu, Christina, 2024. "Retail investors and ESG news," Journal of Accounting and Economics, Elsevier, vol. 78(2).
    10. Christopher P. Clifford & William C. Gerken, 2021. "Property Rights to Client Relationships and Financial Advisor Incentives," Journal of Finance, American Finance Association, vol. 76(5), pages 2409-2445, October.
    11. Sébastien Pouget & Daniel Brodback & Nadja Guenster & Ruichen Wang, 2025. "Investor Valuation for Socially Responsible Assets: A Willingness to Pay Experiment," Post-Print hal-05327492, HAL.
    12. Meyer, Julia, 2024. "Do sustainably managed pension savings foster sustainable investments? Evidence from a field experiment," Journal of Behavioral and Experimental Finance, Elsevier, vol. 44(C).
    13. Baeckström, Ylva & Marsh, Ian W. & Silvester, Joanne, 2021. "Variations in investment advice provision: A study of financial advisors of millionaire investors," Journal of Economic Behavior & Organization, Elsevier, vol. 188(C), pages 716-735.
    14. Marszk, Adam & Lechman, Ewa, 2024. "What drives sustainable investing? Adoption determinants of sustainable investing exchange-traded funds in Europe," Structural Change and Economic Dynamics, Elsevier, vol. 69(C), pages 63-82.
    15. Dangl, Thomas & Halling, Michael & Yu, Jin & Zechner, Josef, 2025. "Social preferences and corporate investment," Journal of Financial Economics, Elsevier, vol. 172(C).
    16. Daniel Engler & Gunnar Gutsche & Andreas Ziegler, 2025. "Does the willingness to pay for sustainable investments differ between non-incentivized and incentivized choice experiments?," MAGKS Papers on Economics 202515, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    17. Andrew Grant & Oh Kang Kwon & Steve Satchell, 2024. "Properties of risk aversion estimated from portfolio weights," Journal of Asset Management, Palgrave Macmillan, vol. 25(5), pages 427-444, September.
    18. Heeb, Florian & Kölbel, Julian & Ramelli, Stefano & Vasileva, Anna, 2024. "Green investing and political behavior," SAFE Working Paper Series 438, Leibniz Institute for Financial Research SAFE.
    19. Gunnar Gutsche & Miwa Nakai & Toshi H. Arimura, 2021. "Individual Sustainable Investment in Japan," RIEEM Discussion Paper Series 2006, Research Institute for Environmental Economics and Management, Waseda University.
    20. Bernd Scherer & Sebastian Lehner, 2023. "Trust me, I am a Robo-advisor," Journal of Asset Management, Palgrave Macmillan, vol. 24(2), pages 85-96, March.

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;
    ;

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G40 - Financial Economics - - Behavioral Finance - - - General
    • G50 - Financial Economics - - Household Finance - - - General

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:zbw:cfswop:334519. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ZBW - Leibniz Information Centre for Economics (email available below). General contact details of provider: https://edirc.repec.org/data/ifkcfde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.