Nudging Investors towards Sustainability: A Field Experiment with a Robo-Advisor

In a field experiment with robo-advisor clients, we explore how default investment options shape sustainable investments choices. Setting sustainable investing as the default significantly increases adoption, with 36% of investors selecting it, compared to just 23% when conventional investing is the default. A follow-up survey reveals stark differences in expectations: most conventional investors believe that their choice offers higher returns and a better risk-return trade-off, while sustainable investors are confident that their portfolios will outperform. While sustainability preferences also play a role in decision-making, the strong focus on financial returns suggests that investors remain reluctant to forgo substantial gains for sustainability in real-world scenarios.

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JEL codes: G11, G23, G40, G51, Q50.

Keywords: Sustainable investing, Defaults, Nudges, Robo advice, ESG.