Abstract:

Green startups are a major driver of eco-innovation and as such a major contributor to climate change mitigation and green growth. However, they often lack sufficient funding from investors. Our study focuses on the factors that determine venture capital investors to invest sustainably. In particular, we analyze how information about i) the investments into green startups of other investors and ii) public institutions affect the willingness of investors to act accordingly. Our study relies on data sources obtained from an online survey with private investors comprising a discrete choice experiment and a questionnaire, and the Mannheim Enterprise Panel, which provides the investment portfolios of the participating investors. Our findings show that the expectation of future demand for green products and the environmental attitudes of investors can explain whether investors engage in the energy industry. Regarding the effect of information provision, we find that investors strongly respond to information on both sustainable investment decisions by other investors and public investment in green startups. However, in both cases, investors reduce their investments in green startups after receiving the information. We show that this is due to investors largely overestimating the share of sustainable investments by others and due to a crowding out of private investment by sustainable investments of public institutions.  

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