Abstract:

Green startups are a major driver of eco-innovation and as such a majorcontributor to climate change mitigation and green growth. However, they oftenlack sufficient funding from investors. Our study focuses on the factors thatdetermine venture capital investors to invest sustainably. In particular, weanalyze how information about i) the investments into green startups of otherinvestors and ii) public institutions affect the willingness of investors toact accordingly. Our study relies on data sources obtained from an onlinesurvey with private investors comprising a discrete choice experiment and aquestionnaire, and the Mannheim Enterprise Panel, which provides the investmentportfolios of the participating investors. Our findings show that the expectationof future demand for green products and the environmental attitudes ofinvestors can explain whether investors engage in the energy industry.Regarding the effect of information provision, we find that investors stronglyrespond to information on both sustainable investment decisions by otherinvestors and public investment in green startups. However, in both cases,investors reduce their investments in green startups after receiving theinformation. We show that this is due to investors largely overestimating theshare of sustainable investments by others and due to a crowding out of privateinvestment by sustainable investments of public institutions.  

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