Nudging Investors towards Sustainability: Insights from a Field Experiment

1. Introduction

Sustainable investing has gained significant traction, fueled by growing environmental concerns, corporate responsibility initiatives, and regulatory changes. However, in the most recent years, this trend has lost momentum. Therefore, important questions emerge: How committed are investors to sustainability? And can behavioral tools, such as nudges, effectively steer them toward more sustainable choices?

A new field experiment addresses these questions, examining how default investment options influence real-world investment decisions. The study, conducted with actual investors from a German robo-advisor, reveals three key insights: first, when sustainable investing is set as the default at the time an investment decision is made, significantly more investors choose it. Second, financial returns remain the primary driver of investment decisions, and beliefs about the relative performance of sustainable investments differ largely between investors and investor groups. Third, the default effect is long-lasting, and the vast majority of investors do not change their initial sustainability choice. The findings have important implications for regulators, financial institutions, and policymakers who seek to promote sustainable investing in the absence of hard law.

2. Study Design

The study was conducted as a pre-registered field experiment with 1,629 new investors who collectively committed an initial investment of €8 million, plus recurring monthly contributions of approximately €200,000. Each participant was randomly assigned different default investment options when they started investing:

• Sustainable default vs conventional default: Half of the investors were shown a sustainable portfolio as the default, while the other half saw a conventional portfolio.
• Other randomized factors: Some investors also had emerging market investments or non-Euro area investments set as defaults.

This study feature is innovative as investment platforms almost exclusively use a certain default, and the study is the first to address defaults for sustainability in a realistic setting. Following the robo-advisor’s onboarding, investors were invited to participate in a follow-up survey assessing their sustainability preferences, return expectations, and risk perceptions. With an exceptionally high response rate of 30%, the survey can provide valuable insights into investor motivations.

3. Key Findings

The study delivers the following main findings relevant for regulators, policymakers, advisors and investors:

a. Defaults Work

Setting sustainable investing as the default option significantly increased adoption:

• 36% of investors chose sustainable investing when it was the default, compared to only 23% when the conventional option was the default—a 56% increase.
• However, most investors still actively opted out of sustainability, suggesting that while convenience and inertia matter, most still prioritize an unconstrained portfolio.

b. Investors’ Beliefs About Returns and Risks Are Highly Polarized

The follow-up survey revealed stark contrasts in investor expectations:

• Overall, 60% of sustainable investors believed their portfolios would outperform.
• In contrast, only 3% of conventional investors believe that the sustainable portfolio will outperform.
• Just 12% of all investors chose sustainability despite expecting lower returns, indicating that purely altruistic investing is rare. This is in contrast to a lot of academic literature with often hypothetical settings.
• Sustainability matters—but only up to a point: investors who valued sustainability as a preference were indeed more likely to invest sustainably. However, when they expected lower returns from sustainable portfolios, very few still chose sustainability. This suggests that financial incentives remain decisive in shaping investment behavior.
• Many investors have difficulties providing realistic estimates of the performance difference between conventional and sustainable investments

c. The Default Effect Has a Long-Lasting Impact

The study also examined whether the default effect persisted over time, tracking investor choices 6–15 months after onboarding. We find that:

• in total, 93% of investors stuck with their initial sustainability setting, reinforcing the power of inertia in financial decision-making;
• the default effect was strongest for investors with smaller initial investments, suggesting that less experienced or lower-stakes investors are more susceptible to behavioral nudges.

4. Implications for Policy and Financial Institutions

The findings carry significant policy and industry implications:

• regulators and financial firms can increase sustainable investments simply by setting them as the default option in pension plans, robo-advisors, and mutual funds—if promoting sustainability is a policy objective. The study shows that the default effects work in a realistic environment where people invest their own money. Inertia ensures long-term effects of these defaults;
• investors are still primarily return-driven. If sustainable investing is to grow further, financial institutions and policymakers must address misconceptions about risk and return. Clearer communication about historical performance, risk profiles, and long-term benefits of sustainable portfolios could help shift perceptions;
• nudging alone is not enough. While defaults are powerful, a sizable portion of investors still opt out. This suggests that additional policy measures, such as tax incentives or clearer sustainability labeling, may be needed to drive further adoption.

5. Conclusion

Our study provides real-world evidence that default settings significantly increase sustainable investing. It also highlights the importance of financial considerations: they remain the dominant factor in investment decisions.

While defaults can be a powerful tool, many investors still actively opt out, emphasizing that sustainability preferences alone are not enough. The finding that only 12% of investors chose sustainability despite expecting lower returns challenges prior assumptions about strong altruistic motives.

For regulators and financial institutions, the takeaway is clear: defaults matter, but so do investor beliefs about financial performance. Encouraging sustainable investing requires both behavioral nudges and better education on return expectations to align financial incentives with sustainability goals.

The authors’ full study is available here.

Lars Hornuf is a Professor at Dresden University of Technology.

Christoph Merkle is an Associate Professor at Aarhus University.

Stefan Zeisberger is a Professor at Radboud University’s Institute for Management Research and an Assistant Professor at the University of Zurich’s Department of Banking and Finance.