Nudging Retail Investors towards Sustainable and Responsible Mutual Funds: A Study of Financial Advisors and Retail Investors in Hong Kong

Sustainable and Responsible Investments (SRI) allocate funds for transition to a more circular economy. Hong Kong, as one of the leading international financial centres, trails its global peers in terms of SRI market development despite some efforts paid by the government. Hong Kong retail investors also exhibited a seemingly lukewarm response towards sustainable and responsible mutual funds (SRMF). On the other front, many surveys suggested that the percentage of retail investors showing interest in SRI far outweighs the percentage actually holding SRI investment instruments. Advance in behavioural economics provided a possible explanation that their intention may not be reflected in their actions because of cognitive biases. Nudge theory of behavioural economics further suggested that we can steer people to better decision-making without abridging their freedom of choice. The prevalence of nudge theory prompted some researchers to explore the application to SRI and SRMF, and some policies and practices are suggested. But nudge practices in the financial markets can be controversial, and we need a sound basis for policies. Accordingly, our study sets up a discrete choice experiment and purposively sampled 218 financial advisors and 475 retail investors. Through conjoint analysis, we investigated whether financial advisors underestimated the importance of SRI strategy adoption placed by retail investors on mutual fund selection and whether the ranking of SRI strategy adoption attribute can be changed by different nudge wordings. Our results showed that there was no significant difference in the importance attached to the SRI strategy attribute between the investors and advisors. Some more proactive nudge policies to retail investors in Hong Kong cannot be justified. The effect of nudge practices also varies, but overall only performance nudge can cause a marginally significant increase in preference put on the SRI strategy attribute. The implications to policymakers and researchers of these findings are further discussed.

Name dc:type.qualificationname

phd

Level dc:type.qualificationlevel

doctoral

Grantor dc:publisher.institution

University of Wales Trinity Saint David

Year dc:date.issued

2022

Author dc:creator

• Hui, Mike Shun Fuk

• HF Masnach
• HG Cyllid

Dc Identifier Grantnumber

UWTSD

OAI identifier oai:identifier

oai:repository.uwtsd.ac.uk:2675