Social identification and investment decisions

This paper investigates the role of social identification in investment decisions. Social identity is an aspect of self-image based on in-group preferences and a perception of belonging to a social group. We collected survey data from retail clients of the only two banks in the Netherlands that exclusively offer socially responsible investment products and savings accounts. Our data show that almost half of the clients invest exclusively at these banks, whereas the other half also holds at least one conventional investment account. Clients vary widely in the extent to which they identify themselves with socially responsible investments (SRI). Investors with a strong social identification allocate substantially more of their wealth to these banks, both in terms of euros invested and in terms of percentage of their total portfolio invested. Social identification also mediates the effect of expected returns on SRI. Our results further show that social identification is stronger among highly educated, younger and low-wealth investors.