Exploring factors that influence social retail investors

Carleton Centre for

Community Innovation

WP #13-01 (revised October 2013)

Exploring factors that influence social retail investors: Evidence from Desjardins Fund Dominique Diouf, Tessa Hebb, and El Hadji

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Title:

Exploring factors that influence social retail investors’ decisions: Evidence

from Desjardins Fund

Authors: Dominique Diouf, Laval University, Quebec (QC), Canada

email: [email protected]

Tessa Hebb, Carleton Centre for Community Innovation, Carleton University,

Ottawa (ON), Canada

DT 2104

1125 Colonel By Drive,

Ottawa, ON, Canada, K1S 0R2

+1 613 520 2600 ex 1217

email: [email protected]

and El Hadji, University of Montreal, Montreal (QC), Canada

Abstract

Most studies on the choices, motivations and behavior of investors consist of a segmentation

focused on socio-demographic characteristics such as age, income, education level etc. Such

approaches seem to simplify, even mutilate, reality by aggregating data about observable

variables and considering investors as homogeneous groups. These perspectives are often

inspired by a scientific approach that consists of separating in order to better understand the

observed phenomena. By considering the individual as a «homo economicus», that is to say, a

rational and autonomous individual who makes decisions motivated by material gains, these

studies fail to recognize all the complexity that shapes human behavior.

This paper argues that to understand the behavior and choices of investors in regards to socially

responsible investing (SRI), we must consider social investors as complex individuals. In

addition, given the role of SRI advisors and other strategies for promoting socially responsible

investment, we must also take into account the influence that the institution may exercise.

Our research builds on a multidimensional approach that explores to what extent demographic,

environmental, social and governance (ESG) issues, the trade-offs between financial return and

social values, the attitudes and the role of the institution (throughout the role of the advisor and

SRI promotion strategies) influence the decisions of individual social investors. Moreover, it

adopts a more open approach by understanding the characteristics and behaviors of individual

social investors in relation to those of conventional investors. Our research provides evidence

from the Desjardins Fund. The qualitative and quantitative data gathered by Desjardins from

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online surveys are subjected to bivariate and multivariate analyses and are complimented by ten

semi-structured interviews with managers, analysts and advisors who provided further insight

into SRI investment behavior and choice. The results show that while demographic

characteristics still remain important in understanding the behavior and attitudes of social

investors, it is their social values, environmental, social and governance (ESG) issues, financial

return considerations and the role played by the institution in mediating investment decisions that

are significantly associated with socially responsible investment of portfolios. Our research

highlights the complexity surrounding the phenomenon of SRI and has several implications both

in terms of theory and practice.

Keywords: socially responsible investing, SRI, investor choice, investment advisors, ESG.

Diouf, Hebb, and Hadji Exploring factors that influence social retail investors’ decisions

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Introduction

In recent years, socially responsible investing (SRI) has been radically transformed from an

activity carried out by a very small number of investment funds that specialize in retail business -

with a negligible economic impact- to an investment philosophy embraced by an increasing

proportion of institutional investors involving pension funds and insurance companies (Eurosif,

2003; Gribben and Faruk, 2004). In its latest study published in 2010, Eurosif estimated that the

global market of SRI was around € 7, 6 trillion, of which Europe held the largest share. SRI has

continued to grow faster than the assets under management of conventional investments (Eurosif,

2010). During the most recent financial crisis, from 2007 to 2010, while total financial assets

remained stagnant, SRI assets enjoyed healthy growth (Ibid). Canadian SRI assets invested with

a degree of social responsibility are estimated at CAD $530.9 billion as of June 30, 2010 (SIO,

2011). This amount represents 19.1% of assets under management in Canada in 2010, roughly

the same share as in 2008 (SIO, 2011).

The three main factors contributing to the growth of SRI, particularly in the US, are the role of

information, the role of women investors in SRI and the idea that investors should not sacrifice

financial performance (Schueth, 2003). Beyond these, contextual factors such as demand from

institutional investors, international initiatives, as well as the pressures of media and NGOs are

determining factors in the development of the SRI market (Eurosif, 2010).

In the past the SRI paradigm suggested that investors could both 'do well and do good', meaning

that they were unwilling to sacrifice financial returns when aligning their values with their

investments (Wood and Jones, 1995; Freeman, 1999). This framework is now giving way to a

new paradigm where the financial materiality of ESG factors is key (Keefe, 2007). Socially

responsible investing is increasingly driving shareholder profit by managing the risks related to

ESG (Hebb et al., 2012).

Within the socially responsible investing market, individual's values remain important and new

research demonstrates the significant impact that values can have on investment (Bauer and

Smeets, 2010a). As a result we need to know more about the psychology of SRI investors


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(Dunfee, 2003; Lewis, 2002). However, taking into account social values and exploring other

factors increases the complexity of socially responsible investing, where empirical facts and

investor beliefs are combined (Statman, 2000).

For the purpose of this paper, we define a social or socially responsible investor as an individual

who holds at least one SRI mutual fund in their investment portfolio. We also suggest that

Ethical Investing is a form of SRI. This can be a mutual fund with a social orientation or a focus

on the environment, or a combination of both (Bauer and Smeets, 2010a). Based on this

definition, we ask why some individual investors practice SRI while others do not (Glac, 2009).

The objective of this research is to explore the factors associated with socially responsible

investment decisions in order to better understand how they influence the choices of individual

social investors. We analyze the theoretical and practical implications. Our research contributes

to the understanding of the motivations, choices and attitudes of social retail investors by

exploring the multidimensional factors associated with socially responsible investment decisions.

The ultimate objective is not only to compare the different segments of investors but also to

grasp how different variables (including for example socio-demographic factors, ESG issues,

attitudes, trade-offs, and the role of the institution) influence, to varying degrees, the choices of

social investors.

Our research asks the following questions:

- What are the demographic characteristics (age, gender, geography, profession, income,

education, etc.) of those who choose SRI? Are these characteristics determining factors in

decisions pertaining to SRI investment?

- Is awareness of environmental, social, and governance issues a determining factor in

decisions on SRI investment?

- What are the expectations both in terms of ESG values and financial returns of social

responsible investors?

- What are the acceptable trade-offs between ethical and ESG issues and financial return?

- What is the role of the financial advisor in SRI investment selection?


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- What theoretical and practical implications can be drawn from the results of this study?

We use data gathered by Desjardin Funds from their customers over the past five years. We

apply several types of analysis (univariate, bivariate, multivariate) to the data collected by

Desjardins Fund from investors holding either an SRI portfolio (Socièterre) or a conventional

portfolio (Diapason), as well as from a third segment of investors holding both types of

portfolios. This quantitative approach was complemented by analysis of qualitative data

emerging from the online survey conducted by Desjardins and from ten semi-structured

interviews that we conducted with fund managers, analysts, financial advisers and other

stakeholders to give more substance to this research. Our research contributes to the debate

surround and the practices of SRI.

From a theoretical perspective, by adopting a multidimensional approach, this research helps to

highlight the complexity surrounding the SRI environment. It shows that social investors are not

only moved by economic interests, but also that they incorporate social values into their

investment decisions. From a practical standpoint, by highlighting the various factors that

influence the decisions of social investors, this research can help to promote new approaches to

strategies to promote SRI. These new approaches, while involving more open and flexible

segmentation practices, should combine the values of social investors with their financial

expectations and increase the role of the institution through enhanced knowledge of advisors and

education of investors on the principles of SRI.

This paper is laid out in the following manner: first, we draw on previous literature and examine

the different approaches to the study of social investors’ choices. This will be followed by a

presentation of the methodological issues we encountered in the current study. We will then

present and discuss our findings. Finally, we will highlight both theoretical and practical

implications of this study and identify its limits and avenues for future research.

1.Theoretical underpinnings and hypothesis


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1.1 Approaches to the study of social investors’ drives

Reviewing the literature on socially responsible investment, we realize that it is often dominatedi

by the debate surrounding the relative performance of SRI funds compared to that of

conventional funds. Thus, most studies attempt to measure the phenomenon by observing its

evolution in terms of performance and changes in market size. The results of these studies,

however, have led to the development of a dichotomy (Girard et al., 2005); while some studies

have found that there is a positive association between social and financial performance (Russo

and Fouts, 1997; Reppeto and Austin, 2000; Orlitzky, Schmidt and Rynes, 2003; Derwall, Bauer

and Koedijk, 2005 etc..) others have argued that the relationship is less conclusive ( Hamilton, Jo

and Statman, 1993; Plating and Scholtens, 2001, Sauer, 1997, Kacperczyk and Harrison, 2006;

Statman and Glushkov, 2008). By focusing the debate on fund performance, these studies have

interrogated the macro-economic paradigm and highlighted the structure of funds at the expense

of a deepened understanding of the role individual choice plays in SRI.

Interest in the behavior of individual investors dates back to 1970, particularly in the form of

empirical studies (Naggy and Obenberger, 1994). However, they rely on utility theoryii and focus

more on “macro” models by aggregating individual behaviour (Naggy and Obenberger, 1994,

Bauer and Smith, 2010a). As a result, these studies have typically masked the inherent

complexity of decision-making and individual incentives in the field of investment.

In order to be more concise, we review four fundamental issues explored by studies on the

behavior of social investors: their socio-demographic characteristics; the motives of ethical

investors; the influence of social values and norms in investment decisions; and the role of

information and communication in SRI choices.

1.1.1 Socio-demographic characteristics

As indicated by Bauer and Smeets (2010a), socio-demographic factors such as age, gender, level

of education, and income have often been used to understand and measure the behavior of

conventional investors (Barber and Odean, 2001; Graham and Kumar, 2006; Bailey, Kumar and


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T.Ng, 2009). These same socio-demographic factors have been used to compare social investors

to conventional investors (McLachlan and Gardner, 2004). For example, scholars such as Rosen

et al. (1991) have found that, compared to conventional investors, social investors tend to be

younger and have attained a higher level of education. In the same vein, Hayes (2001) has

suggested that, unlike older investors, among investors aged 18 to 24 years attention to

environmental concerns are more prominent than financial performance. Tippet and Leung

(2001) argued that, compared to conventional investors, ethical investors in Australia are

predominantly female, younger, and more educated, but tend to hold less diversified and smaller

portfolios than conventional investors. However, these studies have implicitly considered social

investors as a homogeneous group due to their utilization of aggregate data (Bauer and Smeets,

2010a).

1.1.2 The motivations of socially responsible investors

Some scholars have argued that by committing to investing in a socially responsible manner,

social investors want, above all, to know whether the different investment products available

align with their values (Pivo, 2005). This basic assertion is however not shared by all authors in

the socially responsible investing area. Lewis and Mackenzie (2000a) were among the first to

question this simplistic approach through a quantitative study. Based on a sample of 1146

ethical investors in Britain, they explored the impact of the exclusion of certain companies in

their portfolios. This example is quite instructive on whether moral commitments, rather than

economic incentives, are the engines of economic decision-making. The authors found that

ethical investors are neither “devils” nor “saints,” and at times can be both. Thus, Lewis and

Mackenzie indicate that people are willing to put their money where their morality is, despite the

fact that a direct link between money and principles may not exist. The findings of this study are

supported by the research of Webley et al. (2001) who explored, through an experimental

approach, the issue of the commitment of ethical investors. They found that ethical investors

generally remain invested in ethical investment funds even when they perform badly. In the same

vein, Lewis (2001) employed a qualitative methodology (utilizing focus groups) and put forward

the idea of a moral dilemma, where many so-called "ethical investors" have invested in both

ethical and unethical funds. Glac (2009) indicates that the results of most of these studies show


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that ethical investors are equally interested in the financial performance of their investments as

conventional investors (Cullis et al. 1992; Lewis and Mackenzie, 2000a, b; Mackenzie and

Lewis, 1999; Rosen et al., 1991).

1.1.3 Influence of social values on behavior

The influence of social values can be addressed in several ways. Bollen (2007) shows that social

investors, compared to conventional investors, are more loyal to their funds. This loyalty remains

intact even if the funds record negative results. Based on the concept of heterogeneity, Bauer and

Smeets (2010a and 2010b) also discovered that a large segment of value-oriented investors are

more loyal to their mutual funds than others. Focusing their research on the fund managers,

Hong and Kostovetsky (2009) have explored the influence of political values on investments.

Their research has found that fund managers supporting the Liberal Democratic Party in the

United Kingdom tended to select funds that recorded good social and environmental

performance. Conversely, Kacperczyk and Hong (2009) questioned whether social norms have

an impact on financial markets. To answer this question, their research interrogated sin stocks.

They found that institutions framed by social norms such as pension funds are less likely to hold

sin stocks than other funds that are "natural arbitrageurs" who will buy any stock regardless of

social norms when the price is right.

Renneboog, ter Horst and Zhang (2006) found that, compared to conventional investors, socially

responsible investors place less emphasis on risks and fees, while the funds that have initiated

shareholder activism practices and conduct in-house research in the field of SRI attract more

stable investors. In general, most of the studies mentioned above have addressed the social

values issue in relation to demographic characteristics. While Hong and Kacperczyk (2009),

Hong and Kostovetsky (2009), and Bollen (2007) assume that social investors are a homogenous

group (Bauer and Smeets, 2010a), other research (Barber and Odean, 2001; Korniotis and Kumar

2010; Massa, 2003; Bailey, Kumar and Ng, 2010, Bauer and Smeets, 2010a and 2010b) has

argued that social investors are heterogeneous. While these two schools of researchers use

similar segmentation (such as age, gender, and educational status), their approaches appear to be

different. The first group bases their methodology on observable characteristics and uses


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aggregate data to explain the behavior or values of individual investors. In addition to the

observable characteristics, authors in the second group take into account other aspects such as

beliefs and attitudes at the individual level, as well as the impact of non-monetary value on

investment decisions (Bauer and Smeets, 2010a and 2010b), or address latent heterogeneity in

relation to particular types of investments (Bauer and Smeets, 2010a and 2010b; Bailey, Kumar

and T. Ng, 2010).

1.1.4 The role of information in SRI choice

Information and communication are increasingly an important part of research in the field of

responsible investment. Tarrazona-Barreda et al. (2011) indicate that, beyond the return and

diversification, investors who are informed of the socially responsible nature of the funds invest

more. Statman (2008) argues that it is the role of the advisor to explore social preferences, ethical

positions, and religious beliefs in the same way he explores attitudes vis-à-vis risk (p.25). Young

et al., (2010) address the role that information can play by highlighting certain variables such as

the “attitude-behaviour gap” or values-action gap. Indeed, many clients express their desire to

take an interest in ethical products but find it difficult to put this into practice. Beyond mere

information, it is also crucial to establish incentives and even labels to accompany the efforts of

consumers (Young et al.2010). Some authors such as Grinblatt and Keloharju (2001) have

attempted to capture how distance, language and culture can influence the decisions of investors

in Finland. They show that investors are more willing to hold, buy or sell stocks in firms located

close to them and that communicate in their native language, or are led by individuals with

whom they share the same cultural background.

The following table illustrates the four issues highlighted above.

Table 1: Summary table of the factors associated with SRI

Issues Explored Questions

raised

Methodological

approach

Fundamental

concepts

Authors

Socio-

demographic

characteristics

What are the

characteristics

of social

investors? What

Quantitative aggregate

data.

Social investors,

conventional

investors, age,

gender, education,

Barber and

Odean, (2001);

Graham and

Kumar (2006)


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differentiates

them from

conventional

investors?

income. and Bailey,

Kumar and Ng.

(2009); Rosen et

al. (1991); Hayes

(2001); Tippet

and Leung

(2001).

Motivations of

ethical investors

What are the

motivations of

ethical

investors?

Quantitative survey,

qualitative approach

(focus group),

experimental approach.

Ethical values and

non-ethical

values,

moral dilemma,

return

differentials,

commitment.

Lewis (2001);

Cullis et al.

(1992); Lewis

and

Mackenzie,(2000

a, b); Mackenzie

and Lewis (1999)

Rosen et al.(

1991)

Influence of social

(political) values

What are the

impacts of

social (political)

values on SRI

decisions?

Survey, Quantitative

data from institutions

and individuals,

Observable

characteristics,

psychological

constructs,

Segementation,

Conjoint analysis

Institutional

investors/

individual

investors;

Loyalty,

commitment,

Heterogeinity/Ho

mogeneity, latent

heterogeinity,

type of

investments, non-

pecuniary

benefits, past

returns

Bollen (2007) ;

Bauer and

Smeets (2010a et

2010b); Hong

and Kacperczyk

(2009); Hong and

Kostovetsky

(2009); Barber

and Odean, 2001;

Korniotis and

Kumar 2010 ;

Massa, 2003 ;

Bailey, Kumar

and Ng, (2010 );

Renneboog, ter

Horst & Zhang

(2006

The role of

information and

communication

Beyond return,

diversification

and social

values, does

information play

a specific role in

investment

decision?

Survey, qualitative

data, quantitative

approach, regression

Advisor,

information,

–“behaviour gap”;

“values–action

gap”; culture,

language and

distance

Barreda-

Tarrazona et al.

(2011) ; Statman

(2008) ; (Young

et al., 2010);

Grinblatt and

Keloharju (2001),

While these studies have helped to better understand the behavior of socially responsible

investors, it is nonetheless true that they are limited especially in terms of their theoretical

approach. Not only do they aggregate the data and try to homogenize social investors (Bauer and

Smeets, 2010b), but in addition, they do not sufficiently demonstrate the complexity of the

behavior of investors who may be affected by many factors.


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Addressing these limitations, we base our research on a multidimensional approach in order to

highlight the complexity of factors that may influence the decisions of individual social

investors. By using a multidimensional approach we can contribute not only to challenging the

dominant positivist methodology, particularly utility theory, but also to show that because of the

specificity of the field of responsible investment, it is important to emphasize an approach based

on complexity.

1.1.5 SRI as complex phenomenon

From the historical point of view, SRI has experienced a double movement that is both societal

and economic (Arjalies, 2010). Regarding the societal movement the legitimacy of SRI,

particularly in the U.S. and Europe, has long been based on individual and social value systems

which have contributed to the questioning of the rule of economic logic. From the economic

point of view then, SRI is increasingly recognized today by conventional finance as the

integration of environmental, social and governance issues within the classical financial

spectrum. However, in both cases, most studies that strive to capture the contours of this

phenomenon seem to simplify reality.

In the case of the societal approach, SRI has often been understood in its "role as prescriber of

moral value in a society in search of meaning" (Arjalies, 2010, p.3). Economically, SRI marks

the transition from the language of values to the financial materiality of ESG issues and is the

best way to achieve sustainable performance (Keefe, 2007). Moreover, this way of conceiving

socially responsible investing as material to company management has helped to distinguish

most studies around the financial performance of responsible investment, compared to the

performance of conventional investment.

In most cases these studies strove to measure the development of SRI by observing its evolution

in terms of performance and changes in market size. Some empirical studies, often quantitative,

have also emerged in recent years attempting to compare the performance of mutual funds with

those of conventional funds (Margolis and Walsh, 2007).


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Both approaches have had different influences on the way to understand individual social

investors. In the context of SRI as a societal movement, the social investor is often associated

with a set of ethics that emphasizes values. By committing to invest in a socially responsible

manner, social investors want to know, above all, that their investments align with their values

(Pivo, 2005). Thus, in theory, the motivations of social investors are essentially underpinned by

core values that they share.

In the context of the economic approach, the social investor is seen as an investor who integrates

social and ethical criteria into the decision-making process (Kinder and Domini, 1997). Although

recent research has attempted to transcend the dichotomy between the social and economic, the

fact remains that few studies attempt to understand the attitudes and behaviors of social investors

using a multidimensional approach.

McWilliams and Siegel (1997) argue that most studies in the field of corporate social

responsibility (including in the field of SRI) have been dotted with methodological errors

because the authors have attached little importance to theoretical and methodological aspects .

McWilliams and Siegel (1997) express the need to rethink the methodological tools and data

analysis in order to make the studies more credible. In this perspective, our study is based on a

theoretical framework and methodology that emphasizes the contextual and multidimensional

character of socially responsible investment and advocates the triangulation of sources using

qualitative and quantitative methods. This movement away from a one-dimensional approach,

namely financial, to a multidimensional approach implies a paradigm shift in researching SRI

within corporate social responsibility more broadly ( Louche & Lydenberg, 2011).

1.2 Hypothesis

We argue that factors leading people to choose SRI include a combination of their socio-

demographic characteristics, their social values, and the trade-offs they are willing to make

between social and financial returns. Individuals are also influenced by the role of the institution,

particularly through the adviser and advertising strategies that convey information regarding SRI

options. Specifically, we test the following hypotheses:


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Hypothesis 1: Although socio- demographic aspects help determine certain characteristics of

social investors, they are not, however, significant when associated with other variables.

Unlike many studies that show through the aggregation of data the importance of demographic

variables, our study relativizes the influence of socio- demographic factors in the choices that

guide individuals towards investment. All things being equal, the socio-demographic variables

alone cannot explain why some individuals choose socially responsible investing and others did

not. We include variables such as age, gender, education level, occupation, household

composition. Most of these variables were used to study the behavior of both conventional

investors (Dorn and Huberman , 2005; Bailey, Kumar and Ng. , 2009; Graham, Harvey and

Huang (2009) and social investors (Rosen et al., 1991; Tippet and Leung, 2001; Mattersen,

2001; Bauer and Smeets, 2010a).

Hypothesis 2: Social values related to environmental, social, and governance issues guide

people's choices in SRI.

In a recent publication, Glac (2009) attempts to answer the question of why some investors

practice SRI and others do not. The results of this study show that the context in which

responsible investment is undertaken affects the probability of commitment to socially

responsible investing and explains, in turn, that people are willing to sacrifice some degree of

performance when it comes to choosing between socially responsible funds and conventional

funds. The current context is mainly influenced by environmental, social and governance issues.

Awareness of these issues would encourage individuals to incorporate social values into

investment decision making.

Hypothesis 3: Even if they put forward their social values, social investors are still interested in

portfolio returns. The investor profile explains the level of importance given to returns.

With this assumption, we postulate that social investors, like conventional investors, are also

attracted by financial returns. The integration of social values into decision making does not

exclude the pursuit of profit, although these social investors are willing to sacrifice some level of

financial return in the pursuit of social outcomes.


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Hypothesis 4: The more favorable attitudes are to SRI, the more investors tend to choose SRI

products.

This hypothesis explores how favorable or unfavorable attitudes may influence decisions on

socially responsible investment. Conversely, we also try to see the impact of a priori reluctance

towards socially responsible investing and how these factors could limit the decisions of

investing in SRI.

Hypothesis 5: The institution influences the choices in SRI.

- Sub-hypothesis 1: Information sources (advertising, TV, etc.) are important tools for promoting

responsible investment and influence decisions making.

- Sub-hypothesis 2: The investment advisor strongly influences investment decisions.

We test the hypothesis of the role of the institution and thus promotion strategies and the role of

advisor in SRI. As socially responsible investing is a relatively new phenomenon, it is important

to explore the extent to which promotional strategies designed by the institution and the role

played by the advisor influence individuals when choosing SRI. Investors are indeed more likely

to invest in a responsible manner if they are informed of these products (Barreda-Tarrazona et

al., 2011). Similarly, by integrating their personal values in their financial decisions, social

investors seek advisors who respect their choices (Statman, 2008) and are familiar with the

principles of socially responsible investment.

2. Methodology

2.1 Case study

Our research focuses on the Desjardins Fund based in Quebec, Canada. Founded December 6,

1900 by Alphonse Desjardins in Lévis, Quebec, the Mouvement Desjardins is now one of the

largest cooperative financial groups in Canada. It offers full banking services to over 6 million

members and clients. A pioneer in socially responsible investment, Desjardins offers a range of

investment products based on companies whose practices emphasize their sense of social


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responsibility and respect for the environment. Its approach to SRI is based on four main

strategies: exclusionary screens, inclusionary screens, shareholder engagement, and dialogue

and/or collaboration.

As a research strategy, case studies are often used to examine questions within a study of "how"

or “why,” when the researcher has little control over events, or when it is a contemporary

phenomenon grounded in a real context (Yin, 2003). This is consistent with our study that

explores a contemporary phenomenon: the role of the socially responsible investment manager.

2.2 Data generation

2.2.1 Secondary data

Secondary data is “data collected by others, not specifically for the research question at hand”

(Cowton, 1998 (p.424), citing Stewart, 1984; Frankfort and Nachmias, 1992). Cowton argues

that “consulting secondary sources may be particularly useful in the early stages of research for

generating sensible hypotheses or for other aspects of research development” (p.429). For

researchers in business ethics, one of the most important sources of secondary information is

data collected from the companies being studied (Cowton, 1998). In our case, secondary data is

collected from Desjardins through an online survey of its investors collected over the past five

years. Such information is very important and may be considered as private data, coming from

an organizational archive that is not publically available (Cowton, 1998). Like Armand and

Cowton (1993), this data allows us access to valuable information about SRI attitudes of the

public and investors (Desjardins web survey, 2008). It offers insight into the experience and

behavior of holders of Desjardins Funds (Sociéterre portfolios (2010), and Sociéterre and

Diapason unit holders (2012)). Even though using this secondary data may provoke a loss of

control (Cowton, 1998), it is very suitable for our purpose and is used as a complement (Stewart,

1984) to other sources of data such as those collected from interviews and the questionnaire

introduced to investment managers. This approach can be viewed as data triangulation (Jick,

1979). Using secondary data also allows us to have access to less biased information, being

collected independently of the study at hand, (Cowton, 1998).


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Our secondary data is gathered from three online surveys: a web-based survey on perceptions

relative to socially responsible investment (2008), the Desjardins Panel (2010), and the

Desjardins Panel (2012). We subjected the data collected from Desjardins Panel 2012 to

univariate, bivariate and multivariate analyse. The data gathered from the Desjardins Panel 2010

and the Desjardins web-based survey of 2008, particularly the qualitative data, was used to

strengthen our analysis.

2.2.2 Interviews

Interviews are one of the most important sources of case study information (Yin, 2003). In our

study, we conducted semi-structured focused-interviews (Merton, Fiske and Kendall, 1990).

Interviews were conducted in a short period and in a conversational manner (Yin, 2003, p.90).

The questions we asked concerned the characteristics associated with those who choose SRI

products, such as demographic characteristics, socio-cultural values, attitudinal (values based)

characteristics, the role of the advisor in SRI investment and the impediments investors are

facing as social investors.

2.3 Variables, measures and analysis model

Using the data collected by Desjardins, we identify three investor segments. Subsequently, from

the 2012 Panel Desjardins data, we built four variables that have helped shape the analysis

model.

The three segments are the following:

- Segment 1 The Sociéterre portfolio holders: Sociéterre Portfolios are portfolios of

Desjardins SRI funds that select companies with a financial analysis and evaluation based

on environmental, social and governance (ESG) factors.

- Segment 2 The Diapason portfolio holders: These are the holders of traditional

investment portfolios. These portfolios provide optimal diversification in a single

transaction.

- Segment 3 Both Diapason and Sociéterre portfolios holders


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These three segments comprise our dependent variables that can be discriminated by other

variables. The choice of explanatory variables is based on the literature on socially responsible

investing, the assumptions made above, and the constraints of the questionnaire used in the Panel

Desjardins 2012. As shown in the general model of analysis (figure 1), we selected 14 variables

nested in five blocks:

- Demographics: age, gender, education, occupation, household size.

- ESG issues : ESG Profile. As for ESG profile, we combined five variables for proposals

and awarded the following scores: Strongly Agree =3, Somewhat Agree = 1, Does Not

Know = 0, Somewhat Disagree = -1and Strongly Disagree = -3. Then, depending on the

distribution of mean scores, it was determined the following categories: Enthusiastic (2-3

points), Interested (1 to 1.86 point), Warm (0 to 0.86 point), Reluctant (-1.86 to - 0.14

point).

- Trade-off: Investor Profile, expected annual return;

- Attitudes: Satisfaction with the product and product recommendation

- Role of the institution: information sources, product knowledge, level of product

knowledge, and investment management style.

Figure 1 presents our analysis model


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Figure 1: General analysis model

2.4 Data analysis

The various analyses used (univariate, bivariate and multivariate) focus exclusively on data from

the Panel Desjardins 2012 (n = 893). This data has been weighted. We divided the initial weight

by the average in order to obtain the final weight.

We first performed a univariate analysis to determine the profile of all participants while

detecting problematic variables. Thus, for each variable, the frequency distribution or the

measure of central tendency was determined.

SRI holding

0. No

1. Yes

Age

Gender

Education

Occupation

Household size

Inst

ituti

on

ESG Profile

ESG

issu

es

Investor Profile

Expected annual return

Sources of information (role of advisor)

Knowledge of the product

Level of product knowledge

Investment management style

Satisfaction for the product

Recommendation of the product

Att

itude

s

Tra

de-

off

s

Soci

o-d

emog.


20 | P a g e

Then, using a bivariate tabular analysis, we determined the respective characteristics of each

segment with respect to socio-demographic variables, the ESG profile, attitudes, trade-offs and

the role of the institution . The advantage of this approach is to separately identify (using the chi-

square) the variables associated with each of the three segments (p <0.05).

Finally, the variables are included in the multivariate model to observe their effect on the

segments in the presence of each other. The logistic regression analysis was used for this purpose

with a significance level of 0.05.

The analysis of the qualitative content uses an approach of systematic classification of coding

and identification of themes or patterns (Hsieh and Shannon, 2005). Data from 10 interviews was

analyzed using QDA Miner software.

3. Findings

3.1 Profile of participants

The first results relate to the profile of the participants in the study. Thus, Table 2 presents the

distribution of participants by portfolio holding. It shows that on a sample of 893 participants,

Diapason holders are majority (90.4% against 9.6%). The Sociéterre portfolio holder’s are 12.5%

while the holders of two portfolios (and Diapason and Sociéterre) are only 2.9%.

Table 2: Portfolio holding of the participants (n=893)

Portfolios N %

SociéTerre Yes 112 12.5 No 781 87.5 Diapason Yes 807 90.4 No 86 9.6 SociéTerre and Diapason Yes 26 2.9 No 867 97.1

Note: The three segments are not mutually exclusive.

Source: Desjardins Panel (2012)


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Table 3 presents the socio-demographic characteristics of participants in Panel Desjardins. Their

average age is 44 years old and the modal age from 35 and 44 (29.9%). The majority are male

(51.7%), have a college degree (55.2%) and work full time or part-time (78.9%). The average

household size is 2.7 members and most frequently participants have two members in their

household (33.5%).

Table 3: Socio-demographic characteristics of participants (n = 893)

Socio-demographic characteristics N %

Age

18-24 years 18 2.0 25-34 years 187 20.9 35-44 years 267 29.9 45-54 years 237 26.5 55-64 years 153 17.1 65 years and more 31 3.5 Average (continuous) 44.3 (11.3) Gender Female 431 48.3 Male 462 51.7 Education None/Secondary 102 11.4 College/Profession 298 33.4 University 492 55.2 Occupation Not working 42 4.7 Working 705 78.9 Retired 84 9.4 Other 62 6.9 Household size (persons) 1 155 17.4 2 299 33.5 3 168 18.8 4 211 23.7 5 and more 60 6.7 Average (discrete) 2.7 (1.2)

Note: For quantitative variables, the numbers in parentheses refer to the standard deviation

Source: Desjardins Panel (2012).


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Table 4 shows the frequency distribution of the characteristics other than socio-demographic.

Table 4: Values, tradeoffs, attitudes and relationships with the advisor of the participants

(n=893)

Characteristics N %

Values ESG Profile Reluctants 61 6.9 Warm 276 31.0 Interested 425 47.6 Enthusiastic 130 14.6 Tradeoffs Investor Profile Audacious 69 7.7 Dynamic 180 20.3 Balanced 392 44.0 Moderate 168 18.8 Cautious 81 9.1 Expected annual return Less than 5% 67 7.5 Between 5 and 5.99% 169 18.9 Between 6 and 7.99% 160 18.0 8% and more 497 55.6 Average (continuous) 8.0 (9.7) Attitudes Satisfaction of the product Somewhat dissastisfied 157 17.9 Somewhat satisfied 719 82.1 Would recommend the Product Yes 190 21.3 No 703 78.7 Role of the advisor Information Sources By my advisor 742 85.8 By advertising, article (TV, newspapers, magazines) 21 2.4 Brochure, Pamphlet, conference 54 6.2 Through friends, acquaintances, relatives 23 2.7 By internet 25 2.9 Kowledge of the product Did not know the product at all 556 62.2 Has already heard a little of the product 177 19.8 knows a little about the product 145 16.3 Has met an advisor 15 1.7 "Advisor was knowledgeable about the Product" l Strongly disagree 13 1.5 Somewhat disagree 35 4.0 Somewhat agree 361 41.7 Strongly agree 458 52.8 Investment Management


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Autonomous 173 19.5 Discuss with advisor and collective decision 649 73.2 Trusts his advisor 65 7.3

Note: For the expected annual return, the figure in parentheses refers to the standard deviation


The ESG profile reflects the values of participants on environmental, social and government

issues. Thus, according to the distribution points, people “interested” are more numerous

(47.6%) in the sample, followed by “warm” (31%), “enthusiastic” (14.6%) and “reluctant”

(6.9%).

As for the tradeoffs, the analysis shows that the investor profile described as "balanced" is the

most prevalent group in the survey (44%). Despite this balanced approach the majority of

participants (55.6%) expect an annual return of 8% (average) or more.

Attitudinally, participants are “somewhat satisfied” with respect to the product (82%), even if

they do not generally recommend the product to other potential investors (78.7%).

Regarding the role of the institution, there is a predominance of participants who have heard of

the product through their advisor (85.8%). Similarly, the majority of respondents (62.2%) felt

that the advisor did not know the product at all. In terms of investment management, 72.6%

prefer to discuss with the advisor and make decisions together. It should be remembered that

holders of the conventional portfolio (who are the vast majority of respondents) as well as

holders of the SRI portfolio are answering these questions.

3.2 Segmentation based on bivariate analysis

As shown in Table 5, the portfolios segments are distributed differently depending on the socio-

demographic attributes of participants.

Table 5: Portfolios Holding according to socio-demographic characteristics of participants

(n = 893)

Socio-démographic Characteristics

Segments

Societerre Diapason Both


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Age n.s. p<0,05 n.s. 34 years and less 35 (17.1) 175 (85.4) 5(2.4) 35-44 years 34 (12.7) 243 (91.4) 10(3.7) 45-54 years 24 (10.1) 220 (92.8) 7(3.0) 55 years ad more 19 (10.3) 168 (91.3) 4(2.2) Gender n.s. n.s. n.s. Female 60(13.9) 385 (89.3) 14(3.2) Male 52(11.3) 422 (91.3) 12(2.6) Education n.s. n.s. n.s. None/Secondary 15(14.7) 89 (87.3) 2(2.0) College/Profession 30(10.1) 274 (92.3) 7(2.3) University 67(13.6) 442 (89.8) 1(3.5) Occupation p<0,05 p<0,05 n.s. Don’t work 4(9.5) 40 (95.2) 2(4.8) Works 82(11.6) 644 (91.3) 21(3.0) Retired 10(11.8) 76 (90.5) 1(1.2) Other 16(25.8) 47 (75.8) 1(1.6) Household size (persons) n.s. p<0,10 n.s. 1 28(18.1) 131(84.5) 4(3.2) 2 36(12.0) 272 (91.0) 9(3.0) 3 21(12.6) 151(90.4) 5(3.0) 4 19(9.0) 198 (93.8) 6(2.8) 5 and more 7(11.7) 54 (90.0) 2(3.3.)

Note: The percentages (in parentheses) are calculated within categories of independent variables, namely the socio-

demographic characteristics, to better observe their differences in the three segments. The chi-square is used to test

the significance of these differences.


The socio-demographic attributes are concentrated in the segment of the holders of the

conventional Diapason portfolio. Age, occupation and household size are all significantly

associated with this segment. Specifically, those between 45 and 54 years old are 92.8% likely to

hold a classical portfolio, the participants who are not working are 95% likely to hold the

classical portfolio and those who have 4 children are 93.8% to hold this investment. The females

with the "college/Profession" level of education are more likely to hold a Diapason portfolio, but

the differences are not significant.

As for holders of a SRI Sociéterre portfolio, only occupation is significantly associated. Thus,

people with other occupations (including education) are more likely to belong to this group


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(25.8%). The females, aged 34 and younger, with "none/secondary" level and with one member

in the household are more likely to hold a Sociéterre portfolio, but the differences here are not

significant.

For the holders of the two portfolios, no attribute is able to characterize them significantly.

The observation made with regard to the socio-demographic variables also applies to the other

variables in that they characterize differently the holders of socially responsible investment

portfolios and holders of traditional portfolios. However, many of these variables are significant

for the two portfolios (Table 6).

Table 6: Holding portfolios based on the values, trade-offs, attitudes and relationships with

the advisor of in participants (n = 893)

Characteristics Sociéterre Diapason Both

Values ESG Profile p<0,01 p<0,01 p<0,10 Reluctant 1(1.6) 61(100) 1 (1.6) Warm 9(3.2) 271(98.2) 4(1.4) Interested 58(13.6) 380(89.4) 13(3.1) Enthusiastic 44(33.8) 95(72.5) 8(6.2) Trade-offs Investor Profile n.s. n.s. n.s. Audacious 9(13.0) 62(89.9) 2(2.9) Dynamic 26(14.4) 162(90.0) 8(4.4) Balanced 43(11.0) 361(92.1) 12(3.1) Moderate 21(12.6) 149(89.4) 3(1.8) Cautious 12(14.8) 70(86.4) 1(1.2) Expected annual return n.s. n.s. n.s. Less than 8% 46(11.6) 360(90.9) 10(2.5) 8% and more 67(13.5) 447(89.9) 16(3.2) Attitudes Satisfaction of the product p<0,01 p<0,01 n.s. Somewhat dissatisfied 7(4.5) 153(97.5) 3(1.9) Somewhat satisfied 101(14.0) 641(89.2) 23(3.2) Recommendation of the product p<0,01 p<0,01 n.s. Yes 190 153(80.5) 6(3.2) No 703 654(93.0) 20(2.8) Role of advisor Has heard of the product p<0,01 p<0,01 p<0,01 By my advisor 70(9.4) 688(92.6) 16(2.2) By advertising, article (TV, newspapers, magazines) 12(57.1) 11(52.4) 2(9.5) By brochure, conference 13(24.1) 46(85.2) 5(9.3) Through friends, acquaintances, relatives 2(8.7) 22(95.7) 1(4.3 By internet 10(41.7) 16(64.0) 2(8.0)


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Product Knowledge p<0,01 p<0,01 n.s. Did not know the product at all 47(8,5) 520(93.7) 11(2.0) Has heard of the product a little 23(13.1) 1160(90.4) 7(4.0) Did know a little or was familiar with the product 37(25.5) 115(79.3) 7(4.8) Level of product knowledge p<0,001 p<0,001 n.s. At variance 13 (27.1) 36(75.0) 1(2.1) In agreement 94 (11.5) 750(91.5) 24(2.9) Investment Management p<0,01 p<0,05 n.s. Autonomous 35(20.2) 146(84.4) 8(4.6) Discuss with Advisor and make a collective decision 70(10.8) 596(92.0) 18(2.8) Trust advisor 6(9.4) 58(90.6) 0(0.0)

Note: The percentages (in parentheses) are calculated within categories of independent variables, namely the socio-

demographic characteristics, to better observe their differences in the three segments. The chi-square is used to test

the significance of these differences.


The same variables significantly characterize Sociéterre portfolio holders and Diapason portfolio

holders: ESG profile, the satisfaction with the product, having recommended the product, the

sources of information with regard to product, product knowledge, the level of product

knowledge, investment management style. However, these variables characterize the segments

differently.

For the ESG profile, those who are “enthusiastic” about ESG as opposed to reluctant or weak on

ESG tend to hold a Sociéterre portfolio (33.8%), while those who are only warm to ESG tend to

hold a Diapason portfolio (98.2%). These results indicate an important difference between the

characteristics of the SRI portfolio holders and those of traditional portfolios. In more concrete

terms, the higher the awareness of environmental, social and governance issues, the more

individuals tend to invest responsibly. ESG factors are determining factors in socially

responsible investment.

"I think it's the awareness of ESG issues. The first factor, which is important, it is the

environment. Everything starts from there. Then, it grows with the social issues and

governance scandals of course that have occurred in recent years. So it widens but

basically it is an awareness of what might happen in the future. Basically, it’s the desire

to possibly see a difference. So this is a movement that is more or less old but at the same

time there is still much work to do in order to have the wind in the sails. Well, anyway,

there is awareness at that level. "(Portfolio manager, Qualitative interviews, 2012)

Asked whether the awareness on sustainable development issues is crucial, he adds:

"Yes but I will put it more in the context of the media. For a long time we did not talk

about that but I think now with the advent of social media, the prominence of Twitter,


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Facebook and others, information is live and continuous. I think it's more of that side than

the stakeholder awareness. So they hear more about it, therefore, they feel that this is a

problem at home. It does not happen just in Europe, Japan or elsewhere. It happens right

away and so it makes them tick. "

Another participant, a product manager, adds:

"I will say is that we have known scandals in recent years mainly with leaders whose

pockets are full of money. So it is these aspects of governance. For example, Couche

Tard, here in Quebec, at the union level or Walmart or Nike in recent years with child

labor or the debate raging in all aspects related to the environment. I think of shale gas in

Quebec. It's a bit all that. As soon as it hits the comfort of the people or their lives, they

react." (Qualitative interviews, 2012).

Regarding the level of satisfaction, we note that those who hold Sociéterre portfolios are more

satisfied with the product than those who hold a Diapason portfolio. People who have heard of

product through advertising or articles (such as TV, newspapers, or journals) are more likely to

hold a portfolio Sociéterre (57.1%). People who have heard of the product through friends,

acquaintances or relatives are more likely to hold a Diapason portfolio (95.7%). For those who

hold the two portfolios, they have mostly heard about the product through advertising or articles

(9.5).

People who feel that the advisor knew a little about the Societerre product are more likely to hold

a Sociéterre portfolio (25.5%). However, regardless of the level of knowledge of the advisor, the

overwhelming number of people in the survey held the Diapason portfolios.

These results demonstrate clearly the important need for institutions to develop strategies to

promote SRI products. Participants in the interviews have, in turn, emphasized the key role of

promoting SRI products:

"Certainly. It's like advertising. But for now, it really is by advertising. The more we talk

the more people will be interested in that. But after that, it must demonstrate that it works.

We think it works but it has not been proven yet. "(A manager)

"Yes, but I always told my colleagues that SRI is not sold, it is bought. In other words, if

more people request SRI, then advisors or institutions will promote these products. It

really has to come from those people. Institutions still have work to do to show that SRI

product exists but it's really a personal decision." (A product development manager).

"But those who do not know, it behooves us to make them know through advertising or in

newspapers to convince them that it exists. The other thing, for example, this can be the


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slogan: it's 50,000 people who invested in ethical funds, so it can make a difference.

Unity is strength." (Financial Planner 2).

However, if it is true that promotion strategies can help influence people's choices in SRI, it is

also true that they are currently insufficient to convince the customer. The role of the advisor is

also important mostly as part of an approach that emphasizes face-to-face interaction. However,

this assumes that the advisor himself knows SRI products:

"Of course, he (the advisor) is there to understand the customer. But the problem is that

the advisor must also understand the product, which is not always the case. Basically, it

takes a well-trained advisor as well as a good understanding of the customer. For now, I

do not know if this is the case. (...) But actually, in its role, the influence of the advisor on

SRI is certainly important. And the better advisors will be trained, the better investors

will understand the issues and SRI will win” (A portfolio manager).

People with a style of investment management "autonomous" are more likely to hold a Sociéterre

portfolio (20.2%). In contrast, people who talk to the advisor and make decisions together are

more likely to hold a Diapason portfolio (92%). The above explanations on the differences

between the holders of SRI portfolios and those of traditional investment portfolios can be useful

to understand the investment management style. The fact that holders of SRI portfolios are

younger and better educated may help explain this difference. In other words, compared to

traditional portfolio holders, they may be quicker to use the Internet and other means to find the

information that enables them to manage their investments independently.

Basically, only the ESG profile and access to information regarding the investments can be said

to significantly characterize the retention of two portfolios. All variables relative to values,

attitudes and the role of the advisor were significantly associated with holding the Sociéterre

portfolio, on the one hand, and holding a Diapason portfolio, on the other hand.

No “trade-off” variable is significantly associated with any one of the three segments in this

study. Regarding the expected annual return, it is the values categorization of the continuous

variable values which canceled its explanatory power. Bivariate logistic regression with the

continuous variable indicates, in fact, there is a significant relationship between expected return

and portfolio holding.


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However, it should be noted that participants who expected an annual return of 8% and above are

the majority in all three segments. This could raise questions if we take into account the issue of

performance of SRI portfolios. One might well argue that social investors can be characterized

with respect to performance by the confidence that their portfolio, despite other preferences, will

outperform traditional investment portfolios.

The use of certain variables arbitration was somewhat limited by the fact that the 2012 data

either included a quite high percentage of missing cases or did not focus on these variables. To

illustrate, the 2012 data did not explicitly address the risk aversion and the anticipated percentage

devoted to SRI in future by investors. As a result, the choice between SRI and conventional

investment depending on whether the performance is equal, lesser or greater could not be

analyzed because of the important missing cases.

To address these limitations, we used some data from the 2010 Panel Desjardins. This Panel

concerned only SRI portfolio holders and the data were submitted neither to bivariate analysis

nor to multivariate analysis.

Table 7 addresses the choice between SRI and conventional investment depending on the level of

performance. The question is phrased this way: "The Balanced Sociéterre Portfolio had a return

of 19.94% over the past year and 14.89% since inception. Now imagine that you must make a

choice between an investment of this type (SRI) and a more conventional investment, which

would you choose if ... Both yields were equal or SRI is less than 1%, 3%, 5% or 10%.”

Table 7: Choice of the type of investment based on the level of performance

Level of performance Type of investment

SRI Classical investment Don't Know

Equal (n=142) 99.6 0 0.4

1% lower (n= 142 85.2 5.0 9.8

3% lower (n=142 58.0 21.8 20.1

5% lower (n=142) 34.4 33.7 31.8


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10% lower (n=142) 17.3 43.4 39.4

Source : Desjardins Panel, 2010

In the case of equal return, almost all investors choose SRI. Similarly more than 85.2% would

choose to SRI with a yield of 1% lower than that of the classical investment. We notice that 17%

of investors would choose SRI even with a yield of 10% lower than that of the classical

investment.

However, it should be noted that the percentage of respondents who reported "Don't Know"

increases as the difference between the performance yields increases. It rose from 0.4% in the

case where yields were equal between conventional and SRI portfolios, to 39.4% assuming a

yield of SRI 10% lower than that of conventional investment. The percentage of investors who

would choose SRI decreases when the performance of SRI decreases relative to that of

conventional investments.

These results point to several important conclusions about the role of financial performance in

SRI choice :

- The heterogeneity of social investors in terms of expectations for return.

- A category of investors more inclined to use economic incentives and another to social

motives (Smith and Bauer, 2010a)

- A class of investors with conflicting incentives, or facing a dilemma that leads to

difficulties in making choices in terms of expectations between economic and social

issues.

Most participants in the qualitative study also believe that return is important for social investors,

although this does not exclude the incorporation of social values into their investment decisions:

"I would say that this is not a determining factor in the sense that people don't choose SRI

in order to make a profit but they won't choose SRI if they are not able to achieve the

same gains as with traditional investment. So they are not necessarily ready to say "we


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will sacrifice performance for SRI". There is a threshold at some point. There are limits.

It's not the pursuit of profit per se, but more, yes it is true insofar as it is not too much."

(Qualitative interviews, 2012)

"It's profit to 95%. I manage 1000 clients; there are at least 950 for profit. For the other

50, it is the environment and the social. The 5% is mainly trade unions and religious

communities and foundations who want to talk about social concerns. And they are just

5%." (Qualitative interviews, 2012)

"SRI is not necessarily for everyone. There are ‘hard’ investors who wish the investments

were 100% responsible. So, it's the case of an Imam who would not have oil companies

in environmental funds such as Desjardins. But this is really pure. This is what I call the

Greenpeace, the pure. Otherwise, profit is still a major factor for many people. When I

talk about SRI funds, it is not uncommon for them to ask us if it pays, there is

immediately a concern about return; it must make money."(Qualitative interviews, 2012)

"I think it's a whole. But at the same time, if you have to choose between two products:

the first one is a SRI product and the second is not. But there's one of the product which

is above 10%. I'll take the one which makes more than 10%. So there is still a profit

motive within (...). What we are trying to prove now is that basically, there is no penalty

in terms of return to invest in a socially responsible manner. There are studies that show

this but it's not a trend there. So when we invest, there is a profit motive in it. There are

other things. Basically, we must now evaluate all but the evaluation is usually done in the

short term. There is a change in mentality. Then, we must perhaps go through a change in

attitude to make it over the long term.” (Qualitative interviews, 2012)

But they recognize the complexities surrounding the investment, especially the socially

responsible investment:

"People want to invest ... When people invest, it is not just profit and social. This is not a

binary world. It is a multi-sectoral world. Just making the link between profit and social

would be an oversimplification. People want to invest in bonds, equities, stocks in Canada,

shares in the USA and in some emerging countries. They want to buy in Canada but when

they buy in Canada, they want to buy oil, gold. They want to buy the dollar, grocery stores;

they want to buy phones in companies in which they choose. They want companies to have

companies they know as well companies they don't know. They want profitable companies

and unprofitable companies. There is no correlation between profitability and social

awareness. You know, the companies which are less profitable are sometimes the most

contemptuous of social norms, and also the most profitable or very profitable can be

disrespectful. There is no relationship between profit and social respect. These are two

individual questions and the first does not preclude the second. They are two independent

variables." (Qualitative interviews, 2012)

3.3 Segmentation based on multivariate analysis

Table 8 presents the results of the multivariate hierarchical regression of Sociéterre portfolios

holding.


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Table 8: Hierarchical logistic regression of Sociéterre portfolio holding among participants

(n = 112)

Characteristics Block 1 Block 2 Block 3 Block 4 Block 5

Socio-demographic characteristics Age -.01 -.02 -.01 -.01 .00 Gender Female 0 0 0 0 0 Male -.08 -.06 .12 .08 -.19 Education .13 .05 .12 .11 .06 Occupation Is not working 0 0 0 0 0 Is working .17 .50 .68 .81 1.29 Retired .52 .93 .54 .45 .63 Other .83 .85 1.15 1.27 1.42 Household size -.27* -.23 -.17 -.17 -.12 Values ESG Profile *** *** *** *** Reluctant 0 0 0 0 Warm 1.73 1.58 1.46 1.32 Interested 2.95 2.75 2.72 2.71 Enthusiastic 4.25* 4.18* 4.01 4.01 Trade-off Investor Profile Audacious 0 0 0 Dynamic .26 .49 .93 Balanced .30 .44 .98 Moderate -.18 .11 .63 Cautious -.46 -.14 .50 Expected annual return .05*** .05*** .05** Attitudes Satisfaction with the product .12 .19 Recommendation of the product No 0 0 Yes .76* .51 Role of the advisor Heard about the product * From my advisor 0 Through advertising, article 2.13* Through a brochure, leaflet .16 By relatives -1.82 Via internet 1.79* Product knowledge Did not know at all 0 Had ever heard -.20 Knew a little bit or well .49 Level of knowledge -.83** Investment Management Autonomous 0 Discuss with the advisor -1.11


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Trust the advisor -18.23 N 543 543 543 543 542 R-Two (Nagelkerke) % 04.2 17.9 23.1 25.6 39.5 Clearance rate % 89.1 88.9 89.6 90.1 91.8

Note: Numbers refer to regression coefficients, * p <0.05, ** p <0.01, *** p <0.001.


In step 1, only one socio-demographic variable is significant in the presence of other variables:

household size (p <0.05). Whenever the household size increases by one member, the holding of

a Sociéterre portfolio decreases by 0.27. In other words, the probability of holding this type of

portfolio increases in households with fewer members. Block 1 explained 4.2% of the variation

in holding a portfolio Sociéterre, with a clearance rate of 89.1%. If a respondent has the

characteristics described in the model, it successfully predicts the group the respondent belongs

to in 89.1% of cases.

The addition of block 2 in the regression equation provides a significant improvement since the

model increased the explained variance to 17.9%. Thus, the ESG profile is significantly

associated with holding a portfolio Sociéterre controlling for the effect of socio-demographic

variables (p <0.001). 'Enthusiastic' are more likely to invest in a portfolio Sociéterre than

'reluctant'. As for the 'interested' and 'warm', they do not differ significantly from 'reluctant'.

However, household size is more significant in the presence of ESG profile. In the third step, the

introduction of "financial trade off" variables or "arbitrage" increases the strength of association

of the model since it increases the proportion of variance explained to 23.1%. However, among

the two variables entered, only the expected return is significant in the presence of other

variables (p <0.001). The higher the expected return increases, respondents tend to invest in a

portfolio Sociéterre: a one-point increase in % return is associated with an increase of 0.05 in the

possession of such portfolio. The ESG profile is still significant in general.

The addition of Block 4 consists of variables related to attitudes, slightly increased the

proportion of variance explained up to 25.6%. Participants who have already recommended the

product are more likely to hold a Sociéterre portfolio (p <0.05). All things being equal, the

satisfaction of the product is not significantly associated with the possession of this portfolio.

ESG profile in general and the expected returns are still significant.


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The recommendation of the product is no longer significant in the presence of variables related

to the role of advisor (p> 0.05). Presumably this is because those respondents who recommended

are those who use the Internet or advertising and those who disagree with the fact that the

advisor was very familiar with the product.

Our findings suggest that ESG profile in general and the expected returns are still significant.

Table 9 presents the results of the hierarchical regression of the retention of Diapason portfolio

holding.

Table 9: Hierarchical logistic regression of Diapason portfolio holding (n = 807)

Characteristics Model 1 Model 2 Model 3 Model 4 Model 5

Socio-demographic characteristics Age -.02 -.03 .02 .02 .01 Gender Female 0 0 0 0 0 Male .23 .24 .04 ,04 .28 Education -.13 -.05 -.12 -.12 -.05 Occupation Is not working 0 0 0 0 0 Is working -.36 -.73 -1.12 -1.12 -1.85 Retired -1.04 -1.54 -.83 -.83 -1.39 Other -1.17 -1.26 -1.68 -1.68 -2,06 Household size .33* .29* .24 .24 .19 Values ESG Profile *** *** *** *** Reluctant 0 0 0 0 Warm -17.32 -17.02 -17.02 -16.70 Interested -18.63 -18.35 -18.35 -18.18 Enthusiastic -20.04 -19.70 -19.70 -19.60 Trade-offs Investor Profile Audacious 0 0 0 Dynamic -.18 -.19 -.71 Balanced -.45 -.45 -1.17 Moderate -.50 -.50 -1.22 Cautious -.30 -.30 -1.07 Expected annual return -.05*** -.05*** -.05*** Attitudes

Satisfaction of the product -.18 -.23

Recommendation of the product

No 0 0

Yes -1.01** -.73

Role of the advisor


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Heard about the product * From my advisor 0 Through advertising, article -2.08* Through brochure, leaflet .76 By relatives 1,77 Via internet -1.70* Product knowledge Did not know at all 0 Had ever heard about the product .27 Knew a little or well -.70 Level of knowledge .90*** Investment Management Autonomous 0 Discuss with the advisor .16 Trust the advisor 17.89 N 543 543 543 543 542 R-two (Nagelkerke) % 06.2 20.4 26.2 30.1 45.2 Clearance rate % 91.5 91.0 92.0 92.2 94.2

Note: Numbers refer to regression coefficients, * p <0.05, ** p <0.01, *** p <0.001


In step 1, only a socio-demographic variable is significant in the presence of other variables:

household size (p <0.05). Whenever the household size increases by one member, the chance to

hold a portfolio Diapason increases of 0.33 (instead of decreasing as in the case of Sociéterre

portfolio). Block 1 explains 6.2% of the variation in holding a Diapason portfolio, with a

clearance rate of 91.5%.

The addition of block 2 in the regression equation provides a significant improvement since the

model increased the explained variance to 20.4%. Thus, the ESG profile is significantly

associated with holding a portfolio Diapason controlling the effect of socio- demographic

variables (p <0.001). The 'enthusiastic', 'interested', and 'warm' are less likely to invest in a

portfolio Diapason than the 'reluctant' on ESG issues however that these differences are not

significant (p> 0.05). Household size is still significant in the presence of ESG profile (p <0.05).

In the third step, the introduction of "trade-off" type variables increases the strength of

association of the model since it increases the proportion of variance explained to 26.2%.

However, among the two variables entered, only the expected return is significant in the presence

of other variables (p <0.001). The ESG is still significant profile in general.


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The addition of Block 4 consisting of variables relating to attitudes slightly increased the

proportion of variance explained to 30.1%. Participants who have already recommended the

product are less likely to hold a Diapason portfolio (p <0.01). All things being equal, the

satisfaction of the product is not significantly associated with the possession of such portfolio.

ESG profile in general and the expected returns are still significant.

At the fifth step, the introduction of variables relating to the role of the advisor substantially

increases the strength of association of the model since it increases the proportion of variance

explained to 45.2%, which is widely acceptable in the social sciences. The source of information,

one of the four newly introduced variables, is significantly associated with holding a portfolio in

tune with the presence of other variables (p <0.05). Respondents who heard of the product by

advertising and articles are less likely to hold a portfolio than respondents who have contacted

their advisor (coef = -2.08). Similarly, respondents who have heard of the product over the

Internet are more likely to hold a Sociéterre portfolio than respondents who have contacted their

advisor (coef = -1.70).

Moreover, the degree of product knowledge by advisor is significant (p <0.001). The

recommendation of the product is no longer significant in the presence of variables related to the

role of advisor (p> 0.05). Presumably this is because the respondents who did not recommend

the product are also those who are informed by their advisor and who are in agreement with the

fact that the counselor was very familiar with the product.

Our analysis led to the establishment of a parsimonious model that incorporates only the

significant variables. (Table 10)

Table 10: Parsimonious logistic regression for the portfolios Diapason and Sociéterre

holding among participants (n = 893)

Characteristics Sociéterre Diapason

ESG Profile *** *** Reluctant 0 0 Warm 1.57 -18.02 Interested 2.87 -19.38 Enthusiastic 4.20(66.76)* -20.86 Expected annual return .05(1.05)*** -.05(.95)*** Heard about the product *** ***


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By my advisor 0 0 By advertising, article 2.12(8.34)** -2.15(.12)** Through brochure, leafleft .44 .32 By relatives -.33 .57 Via internet 2.10(8.17)*** -2.12(.12)*** Level of knowledge -.78(0.46)*** .91(2.49)*** N 553 552 R--two (Nagelkerke) % 31.6 25.9 Clearance rate % 90.8 93.1

Note: Numbers refer to regression coefficients, and odds ratios in parentheses, * p <0.05, ** p <0.01, *** p <0.001


People enthusiastic about ESG are 66 times more likely to hold a portfolio Sociéterre than those

reluctant about ESG.

Respondents who heard of the product by advertising and news article are eight times more

likely to hold a Sociéterre portfolio than respondents who contacted their advisor. Respondents

who have heard of the product via Internet are also eight times more likely to hold a portfolio

Sociéterre than the respondents who have contacted their advisor.

Respondents who strongly agree with the statement that the advisor was very familiar with the

product are two times (1/0.46) more likely to hold a Diapason portfolio than respondents who

somewhat agree.

4. Discussion

4.1 Less structural socio-demographic characteristics and attitudes

The socio-demographic factors remain important in explaining certain behaviors and attitudes of

social investors. To illustrate, we stated that the fact that investors who are younger and educated

would explain on one hand their high degree of awareness towards ESG issues and, on the other

hand, their autonomous style of investment management and the fact that they most frequently

use advertising and the Internet as sources of information on socially responsible investment.


38 | P a g e

These findings confirm those of many studies on socio-demographic characteristics of social

investors, compared to conventional investors. Research by Rosen et al. (1991) and Tippet and

Leung (2001) indicate that, compared to conventional investors, social investors are younger

with a higher level of education. In the same vein, the results of research conducted by Mattersen

(2001) conclude that 85% of those aged 25-39, compared to 72% of those aged between 40 and

59 declare that they invest ethically. Being young and having a high level of education have a

positive impact on awareness of environmental and social issues and would, therefore, be an

incentive to invest responsibly. Hayes (2001) also found that people aged between 18 and 34 are

most likely to express their environmental concerns, compared to older investors.

Although our research also finds that those with "no / secondary" education (14.7%) tend to hold

a socially responsible investment portfolio, it should be noted that those with university level are

also a significant proportion (13.6%). With respect to gender, our research is also consistent with

the findings of some studies such as Tippet and Leung (2001) that lead to the same conclusion,

that women seem more ready to invest in a socially responsible manner than men.

While socio-demographic characteristics may allow us to compare social investors with

conventional investors in determining their respective characteristics, by themselves they cannot

explain why investors choose SRI products. No socio-demographic variable is indeed significant

when associated with other variables. This confirms our first hypothesis.

4.2 The importance of social values and financial returns

4.2.1 ESG issues

The ESG profile generally remains significant both as part of the hierarchical logistic regression

applied to the holders of socially responsible investment portfolios (Sociéterre) and with respect

to the analysis applied to the holders of traditional investment portfolio (Diapason). The same

finding applies as part of the parsimonious model. However, it is worth noting a significant

difference in the meaning of ESG factors:


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- Those who self-reported being “enthusiastic” about ESG profiles are more inclined to

invest in a Sociéterre portfolio than reluctant.

- Those self-reporting as “enthusiastic,” “interested” and “warm” are less likely to invest in

a Diapason portfolio than those who self- reported as being reluctant about ESG profiles.

- “Enthusiastic” investors are 66 times more likely to hold a Sociéterre portfolio than

investors self-reporting as “reluctant.”

All things being equal, this shows that ESG issues are strongly associated with holding socially

responsible portfolios. In other words, environmental and governance concerns as well as social

values are important factors that influence the decisions of social investors.

These results validated the hypothesis that the ESG concerns and social values of social investors

influence socially responsible investment decisions, and are well in line with previous studies

(McLachlan and Gardner, 2004, Bell, 2001) showing that ethical and social issues are crucial

components of SRI choices. However, it is important to note that reporting that ESG issues are

important for investment decisions (McLachlan and Gardner, 2004) is not sufficient to explain

why these factors are crucial in the choices of individual investors. The concepts of "Attitude-

Behaviour Gap”or “Values-Action Gap" developed by Young et al. (2010) are important for

understanding this nuance. These authors point out in their study that 30% of consumers say they

are concerned about environmental issues but are struggling to translate them into purchasing

decisions. In the case of our study, ESG concerns were already translated into purchasing

decisions since the segment of Sociéterre portfolio holders consists only of individuals who

already invest responsibly. This implies that they are all, to varying degrees, concerned about

environmental, social and governance issues.

4.2.2 The expected return

The expected return is a significant variable with both SRI portfolio holders and traditional

investment portfolio holders. However, as noted above, it is with the holders of SRI portfolios,

given the complex nature of SRI where facts and emotions can be intertwined, where conflicting

drivers are evident. The fact that this variable is significant shows, firstly, that social investors


40 | P a g e

still care about returns and, secondly, that despite a priori reluctance, they remain convinced that

their portfolios will produce the same or better financial results than traditional portfolios.

The fact that the majority of both the SRI portfolio holders and the conventional portfolio

holders expect a return of 8% or more shows that social investors highlight economic

motivations in addition to social values. This also validates our hypothesis and is consistent with

the findings of some of the precedent studies such as Kennedy (2001). However, like Bauer and

Smeets (2010a), we were unable to determine which category of investors seems more attracted

by economic motives than others. Moreover, the decline in the percentage of investors when

rates of return between SRI and the conventional investment fall, demonstrates the tough choices

and sometimes conflicting motivations that exist between the economic and social aspects of

investing.

4.2.3 The role of the institution

The important role of the institution is illustrated through the "information sources" and

"knowledge level" in SRI variables; having heard of the product by advertising, articles or the

Internet increases the chance that an individual will hold a Sociéterre portfolio.

These results show the importance of strategies to promote SRI using advertising and the

Internet. The fact that the majority of holders of SRI portfolios are young and have relatively

high levels of education explains the predominance of the use of advertising and Internet as

sources of information. Another explanation could be that as these portfolio holders belong

overwhelmingly to the "enthusiastic ESG" profile and have an independent management style,

they are less inclined to contact advisors as part of their investment management strategies.

However, the most notable fact is in the degree of knowledge of the advisor in SRI. The results

show that respondents who strongly agree with the statement that the advisor was very familiar

with the product are more likely to hold the conventional portfolio than respondents who

somewhat agree. This calls into question the knowledge of the advisors about SRI products. At

this level, our sub-hypothesis was invalidated because our predictions were based on the

assumption that the role of the advisor was important because of its knowledge about socially


41 | P a g e

responsible investing. Nevertheless, some studies have shown the influence of information and

communication in investment decisions in socially responsible investment (Barreda-Tarrazona et

al. (2011) and the role of advisor (Statman, 2008). Moreover, Grinblatt and Keloharju (2001)

went further by showing the importance of culture, language and distance in investment

decisions.

Conclusion

Our study resulted in the identification of several factors associated with socially responsible

investing. Three are most significant: ESG issues, returns, and the role of the institution. These

results have several theoretical and practical implications.

From the theoretical point of view, the association between these factors and socially responsible

investment further demonstrates the complexity surrounding this phenomenon. The features of

SRI, as argued by Statman (2008), are the mix of utilitarian nature factors (performance, risk,

liquidity, taxes, etc.) with expressive nature factors (patriotism, character, social prestige, etc.) of

this type of investment. Social investors derive their inspiration from several sources such as

family, religion, knowledge and experience (Statman, 2008). The investment decision in SRI

thus depends on the motivations of the individual; their beliefs, their goals, their desires, their

dreams but also the socio-cultural context within which they make investment decisions. From

this perspective, we believe that research on individual social investors should assume that

investors are 'individuals in situations' to parody Jean-Paul Sartre, who superimpose multiple

identities. Furthermore, in addition to triangulating sources and methods, they should combine

meaning to measure the practical with the expressive and above all, take into account the

heterogeneous and unpredictable nature of individuals and groups.

From a practical standpoint, our research has several implications, including on the promotion

strategies of SRI.

First, the fact that socio-demographic factors, while helping to explain certain characteristics of

individual investors are not significant in the presence of other variables, challenge segmentation

practices often being experienced in modern organizations. While one needs segmentation to


42 | P a g e

better target the market, it remains true that the practice of segmentation must remain flexible

and open, diverse, customized and placed in a wider context. For this, we must break with

simplistic approaches, intersecting demographics, generational memberships, and so on with the

social values of individuals, the trade-offs they are willing to make, and their motivations.

Secondly, the fact that social investors seek profit and want their social values to be taken into

account also implies new approaches to strategies to promote SRI. These new approaches, while

helping combat reluctance and prejudices, should combine meaning and values with financial

returns.

Finally, increasing the role of the institution in the development of SRI would help give more

visibility to this phenomenon. Beyond promotion strategies, it's important to contribute to

education in responsible investment both for investors themselves, namely in the areas of

shareholder engagement, and advisers, particularly in terms of the principles of socially

responsible investment and integrating a sensitivity of social values in their approach to

customers.

Our research has a number of limitations. Our reliance on secondary data gathered by company

sources is one. Also the fact that our case only covers Quebec, a single Canadian region with a

distinct set of linguistic and cultural characteristics. Additionally, the number of missing cases in

some variables and categories of variables, variables relative to "trade-offs" such as risk and the

percentage that investors (both conventional and social) who would like to focus on their future

investments were not highlighted as part of this work. Also, the segment of investors holding the

two portfolios was often left unexamined because of the very low number of participants. Thus,

it’s important to further understand the factors influencing the choices of this class of investors

(i.e. those investing in both conventional and socially responsible portfolios) to contribute to a

deeper understanding of the phenomenon of SRI.

As socially responsible investment has no universal principles (Cummings, 2000; Sparkes,

2001), it would be interesting to explore how ESG issues influence the dynamics of responsible

investment depending on factors such as differing the regions, cultures, and levels of economic


43 | P a g e

development, to name just a few. Such research might address the particular socio-political and

environmental influences that prompt individuals to invest responsibly. Finally, in terms of

marketing strategies, it would be appropriate to explore how the integration of ESG factors in

financial decisions favors the emergence of new approaches and marketing strategies based on

social values and economic returns to reflect functional, social and emotional motivations.


44 | P a g e

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End Notes i It must be recognized number of studies, in recent years, explore other issues such as shareholder engagement or

the motivations of social investors.

ii "Utility Theory suggests that although it is impossible to measure the utility derived from a good or service, it is

usually possible to rank the alternatives in their order of preference to the consumer. Since this choice is constrained

by the price and the income of the consumer, the rational consumer will not spend money on an additional unit of

good or service unless its marginal utility is at least equal to or greater than that of a unit of another good or service."

Business Dictionary accessed October 20 2013, http://www.businessdictionary.com/definition/utility-

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