Climate Transition Beliefs
Marco Ceccarelli, Stefano Ramelli
Management Science · Fri
Abstract
We study an overlooked driver of heterogeneity in green investment behavior: differences in expectations about the long-term trajectory of the energy transition (climate transition beliefs). Drawing on a survey of U.S. retail investors, we document considerable heterogeneity in climate transition beliefs at different long-term horizons. Transition optimism is positively associated with expected green financial performance and preferences for green investments, particularly among investors without strong pro-environmental attitudes. Two preregistered survey experiments provide causal evidence that transition beliefs play a key role in shaping green return expectations and investment decisions. Distinguishing between heterogeneous beliefs and preferences is crucial for a better understanding of the motivations behind green investment behavior. This paper was accepted by Caroline Flammer, sustainability. Funding: This work was supported by the Universität St. Gallen Basic Research Fund [Grant 2130787]. Supplemental Material: The online appendix and data files are available at https://doi.org/10.1287/mnsc.2025.00564 .
Keywords
behavioral finance, climate change, expected returns, heterogeneous beliefs, investments, information provision experiments, surveys, sustainable finance
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