Consumer Preferences Toward Socially Responsible Investments in Germany: An Empirical Analysis Based on Religion

Introduction

Financial services industry is at crossroads, and it needs a radical approach to address the issues of how the financial institutions such as banks do their business and deal the critical issues of ethical values and Socially Responsible Investments (SRIs) in the context of the recent financial crisis (W. Tariq et al., 2021; Von Wallis & Klein, 2015). The concept of ethics, SRIs and value-based investment is not new but certainly gaining the attention of consumers and investors (Qiu, Movassaghi, & Bramhandkar, 2017). The demand for social responsibility has risen not in political and social aspects of society but also in economic markets, in recent decades. The globalization and socio-political trends are urging the investors to consider seriously the SRIs, ethical banking, and sustainability (Von Wallis & Klein, 2015). SRIs is an ethical investment philosophy that incorporates profit maximization with social endeavors (Chamorro‐Mera & Palacios‐González, 2019). By integrating social, environmental and financial aspects of sophisticated investments, socially conscientious investors pursue economic and social value maximization (Puaschunder, 2019). There is not a zero-sum game to achieve financial goals by compromising social benefit, but it is possible to gain financial profit with catalysing socio-political aspects of the society and various other forms of the utility simultaneously (Ehsan et al., 2022).

For SRIs and sustainable investment, there are different terminologies that are used. Sandberg, Juravle, Hedesström, and Hamilton (2009) use ethical investing or valued-based investing for SRIs. Sandberg et al. (2009) define SRIs as “integration of certain non-financial concerns, such as ethical, social or environment, into the investment process”. According to Qiu et al. (2017) SRI is also called “ethical investing, green investing, impact investing, mission-related investing, sustainable, responsible and impact investing and valued-based investing”. Moreover, SRI is an investment sector in which investors use environment, social and corporate governance (ESG) as screening criteria for investments for financial gains.

Walker (2018) states that the size of global impact financing is $1.3trillion and many investors are looking ways to combine their financial returns with SRIs. In recent years, impact investing is gaining popularity among asset managers. Stevenson (2018) stated that by the end of October 2018, the global Assets under Management (AuM) in ESG exchange related funds have seen a rapid growth of 26% and increased up to $22 billion. The author also argues that over 80% of institutional investors believe that investments in ESG funds will further surge in coming years. Economist (2018a) stated that the European Union (EU) reckons to outline an action plan to develop sustainable finance in Europe and over last ten years SRIs have become a mainstream element in the financial services industry. In a recent article, Devine (2018) argues that investors are encouraging fund managers to invest in responsible investments. Several factors are behind this trend including client demand, ‘potential for outsized returns’, risk management and increasing regulation.