Do investors compensate for unsustainable consumption using sustainable assets?
Title: Do investors compensate for unsustainable consumption using sustainable assets?
Abstract: I combine categorized bank transactions with multiregional input-output data to estimate carbon footprints from consumption for 6,151 investors. By linking these footprints to trading account transactions, I provide novel evidence of negative spillovers between the sustainability of consumption and investing, especially for assets with favorable GHG-emission ratings. Unsustainable consumption explains cross-sectional variation in sustainable investor portfolios better than alternative explanations based on heterogeneous sustainability preferences or financial motives. I provide additional evidence that portfolio sustainability is positively related to religious beliefs which are historically tied to offsetting. My findings suggest that unsustainable consumers aim to offset their emissions from consumption with sustainable investments, and the results are robust to alternative specifications of unsustainable consumption and the analyzed investor sample.