Carleton

Centre for

Community Innovation

Exploring factors that influence social retail investors: Evidence from Desjardins Fund

Dominique Diouf, Tessa Hebb, and El Hadji

WP 13-01

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Exploring factors that influence social retail investors: Evidence from

Desjardins Fund

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

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

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 to better understand the observed phenomena.

By considering 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. Even though more researchers attempt to explore other

factors such as those related to psychological aspects or social values, it should be noted that they

do not always take into account the multidimensional nature of the observed phenomena. This

paper argues that to understand the behavior and choices of investors as regards SRI, we must

consider social investors as complex individuals and also take into account the influence that the

institution may exercise (thanks to the role of SRI advisors and the other strategies for promoting

socially responsible investment). We must also adopt a more open approach by understanding the

characteristics and behaviors of individual social investors in relation to those of conventional

investors. Our research builds on the theory of complexity framework. According to this theory,

the truth must be thought of as a system where there is inter-influence between the whole and the

parts. In this perspective, the individual must not only be seen as rational and autonomous, but

more as an individual aggregation of overlapping identities. Our research provides evidence from

focus Desjardins Fund, with data gathered by Desjardins from online surveys. We subjected the

data to bivariate and multivariate analysis. This qualitative methodology is complimented by a

series of 10 semi-structured interviews with managers, analysts and advisors. 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 that are significantly

associated with socially responsible investment of the portfolio. 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,

Acknowledgements: We would like to thank Desjardins for their assistance in this research,

particularly in providing data for analysis, interviews and expert advice. We would particularly

want to thank Rosalie Vendette and Benjamin Commerie of Mouvement Desjardins and all the

participants of the qualitative interviews for their assistance with the research. We would like to

acknowledge the role of the Social Sciences and Humanities Research Council is assisting with

the funding for this research.

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1. INTRODUCTION

1.1- Contextualisation

In recent years, 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 argues that the

global market of SRI can be estimated at around € 7, 6 trillion, of which Europe holds 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, the total universe of professionally managed assets remained almost stable

while SRI assets, as always (documented in the report of Eurosif), enjoyed healthy

growth. Regarding the specific case of Canada, all assets invested according to social

responsibility principles are estimated to $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 important role of information, the role of women investors in SRI and the idea that

investors should not sacrifice performance are three main reasons that contribute to the

growth of SRI, particularly in the US (Schueth, 2003). Beyond these three main reasons,

contextual factors such as the demand from institutional investors, international

initiatives, the pressures of media and NGOs as well as the role of individual investors

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

The idea that investors should not sacrifice performance results from a progressive

erosion of an old design of socially responsible investing (Wood and Jones, 1995;

Freeman, 1999) which is in the process of giving way to a new paradigm by which the

financial materiality of ESG factors is demonstrated (Keefe, 2007). Socially responsible

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investing is increasingly seen as a performance factor, an engine of shareholder profit by

managing the risks related to ESG (Hebb et al., 2012).

With the development of the socially responsible investing market, the importance of

values increases. It is increasingly apparent that the values have a significant impact on

investment (Bauer and Smeets, 2010a). There is therefore need, beyond the performance

of SRI, to know more about the psychology of investors in the context of socially

responsible investment (Dunfee, 2003; Lewis, 2002). However, taking into account the

social values and exploring other factors increase the complexity in the specific field of

socially responsible investing where facts and beliefs seem to be combined (Statman,

2000).

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

individual who holds at least one SRI mutual funds that can be a mutual fund with a

social orientation, focused on the environment, or a combination of both (Bauer and

Smeets, 2010a). Thus, the question of why some individual investors choose SRI while

others do not practice it (Glac, 2009) becomes crucial

Our research seeks contribute to the understanding of the motives, choices and attitudes

of social retail investors by exploring the multidimensional factors associated with

socially responsible investment decisions.

1.2- Structuring research questions and objectives

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 and analyze theoretical and practical implications.

It revolves around the following questions:

- Are there distinguishing characteristics that are associated with those who choose

SRI products? Can we find a common indicator for SRI choices?

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- What are the common demographic characteristics (age, gender, geography,

profession, income, education, etc.)?

- Are there common attitudinal (values-based) characteristics?

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

in decisions on SRI investment?

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

- What are the gaps and trade-off between the ethical and ESG issues and the

financial return?

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

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

study?

The answers to these questions require several types of analysis (univariate, bivariate,

multivariate) applied to the segment of social investors as well as to the segments of

conventional investors and of those who hold both types of investment.

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

to grasp how different variables (socio-demographic, ESG issues, attitudes, trade-offs,

role of the institution) influence, to varying degrees, the choice of social investors.

2. PROBLEMATIC

2.1. Focusing on four fundamental SRI issues

Looking through the literature on socially responsible investment, we realize that it is

often dominated1 by the debate about the performance of conventional funds versus SRI

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, lead to a kind of "dichotomy" (Girard et al., 2005). While some studies find 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,

1 It must be recognized number of studies, in recent years, explore other issues such as shareholder

engagement or the motivations of social investors.

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Bauer and Koedijk, 2005 etc..) others argue that there is a negative association (

Hamilton, Jo and Statman, 1993; Guerard, 1997; Plating and Scholtens, 2001, Sauer,

1997, Bauer, Koedijk, and Otten, 2002; Kacperczyk and Harrison, 2006; Statman and

Glushkov, 2008). By focusing the debate on fund performance, these studies are examine

the macro-economic paradigm and highlight fund structure at the expense of deepening

our understanding of the role individual choice plays in SRI.

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

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

and focus more on the “macro” models by aggregating individual behaviour ( Naggy and

Obenberger, 1994, Bauer and Smith, 2010a). As a result, theses studies hide entire

sections of the inherent complexity of decisions and choices in the field of investment.

In order to be more concise, we review, as part of this research, four fundamental issues

explored by studies on the behavior of social investors: The 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. However, these

four issues are not disparate but rather cross-thematic.

2.1.1 Socio-demographic characteristics

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

gender, level of education, income have often been used to understand the behavior of

investors, particularly the conventional investors (Barber and Odean, 2001; Graham and

Kumar, 2006; Bailey, Kumar and T.Ng, 2009). The same socio-demographic factors were

used to compare social investors to conventional investors (McLachlan and Gardner,

2004). Thus, Rosen et al. (1991) found that, compared to conventional investors, social

investors are younger and have a higher level of education. In the same vein, Hayes

(2001) suggests that, unlike older investors, investors aged between 18 and 24 years are

most prominent environmental concerns than financial performance. Tippet and Leung

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

predominantly female, younger, more educated but holding less diversified and lower

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portfolios. However, these studies implicitly consider social investors as a homogeneous

group because they use aggregate data (Bauer and Smeets, 2010a).

2.1.2 The motives of ethical investors

By committing to investing in socially responsible manner, social investors want, above

all, to know whether the different investment products to be selected are in line 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 explore the impact of the exclusion of certain

companies in their portfolios. This example is quite instructive on whether moral

commitment, rather than economic incentives, is the engine of economic decision.

These authors find that ethical investors are neither “devils” nor “saints” and can be both

value-laden ethical and unethical. Thus, Lewis and Mackenzie indicate that people are

willing to put their money where their morality is even though 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 explore, through an experimental approach, the

issue of the commitment of ethical investors. They find that ethical investors generally

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

vein, Lewis (2001) uses a qualitative methodology (focus group) and puts forward the

idea of moral dilemma: many investors called "ethical investors" are investing in both

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

show that ethical investors are also as 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).

2.1.3 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 fund records negative results. Based on the concept

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of heterogeneity, Bauer and Smeets (2010a and 2010b) also discovered that a large

segment of values-oriented investors are more loyal to their mutual funds than others.

Focusing their research on the fund managers, Hong and Kostovetsky (2009) explore the

influence of political values on investments. They find that fund managers that support

the Liberal Democratic Party in the United Kingdom tend to select the funds that record

good social and environmental performance. In the same vein, Kacperczyk and Hong

(2009) questioned whether social norms have an impact on the markets. To answer this

question, they focus their research on sin stocks. They find that institutions that are

framed by social norms such as pension funds are less likely to hold sin stocks than other

funds who are "natural arbitrageurs" and receive less coverage from analysts compared to

other funds with similar characteristics. Renneboog, ter Horst and Zhang (2006) found

that, compared to conventional investors, socially responsible investors place less

emphasis on risks and fees and the funds that have initiated shareholder activism

practices and have house-in- research in the field of SRI attract more stable investors. In

general, most of these studies mentioned above address the social values issue in relation

to demographic characteristics. While Hong and Kacperczyk (2009) and Hong and

Kostovetsky (2009), 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) argue that social investors are heterogeneous. While these two groups of

researchers all use segmentation (age, gender, etc.), their approach appears to be

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

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

observable characteristics, some authors, among the second group, take into account

other aspects such as beliefs and attitudes at the individual level and the impact of non-

monetary value on investment decisions (Bauer and Smeets, 2010a and 2010b) or address

heterogeneity (latent heterogeneity) in relation with the types of investments (Bauer and

Smeets, 2010a and 2010b; Bailey, Kumar and T. Ng, 2010).

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2.1.4 The role of information:

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, participants (in this case, investors) invest more when they are

informed of the socially responsible nature of the funds. Statman (2008) argues that it is

the role of advisor to explore social preferences, ethical, religious clients 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 “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 like Grinblatt and Keloharju (2001) attempt 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 lead 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

Explored Issues Questions

raised

Methodological

approach

Fundamental

concepts

Authors

Socio-

demographic

characteristics

What are the

characteristics

of social

investors? What

differentiates

them from the

conventional

investors?

Quantitative aggregate

data

Social investors,

conventional

investors, age,

gender, education,

income, etc.

Barber and

Odean, (2001);

Graham and

Kumar (2006)

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,

focus group

Ethical values and

non ethical values

Moral dilemma,

return

differentials,

Lewis (2001);

Cullis et al.

(1992); Lewis

and

Mackenzie,(2000

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commitment. 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/

individual level,

Observable

characteristics/psychol

ogical constructs

Segmentation

Conjoint analysis

Institutional

investors/

individual

investors;

Loyalty,

commitment,

Heterogeneity/Ho

mogeneity, latent

heterogeneity,

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,

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 investors and

socially responsible investors, it is nevertheless 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.

Addressing these limitations, we base our research on complexity theory. While

complexity theory has often been used in social sciences, it serves less, however, as a

basis for studies in behavioural finance. Using this theory can contribute not only to

challenging the dominant positivism, 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.

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2.2 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 first, the

legitimacy of SRI, particularly in the U.S. and Europe, has long been based on individual

and social value systems which 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

into the classical financial analysis. 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). In the

case of the economic approach, 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 polarize most studies around

the financial performance of responsible investment, compared to the performance of

conventional investment.

These studies, in most cases, strive to measure the SRI phenomenon by observing its

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

often quantitative, have emerged in recent years that try to compare the performance of

mutual funds with those of conventional funds.

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

social investors. In the context of societal movement, the social investor is often likened

to investor ethics that emphasizes its values. By committing to investing in a socially

responsible manner, the social investor wants to know, above all, whether the different

investment products to be selected are in line with their values (Pivo, 2005). Thus, in

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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 research in recent years tend to transcend the dichotomy

between the social and economic, the fact remains that complexity theory has rarely been

used explicitly to understand the attitudes and behaviors of social investors.

From the methodological point of view, McWilliams and Siegel (1997) argue that most

studies in the field of corporate social responsibility (including in the field of SRI) are

dotted with methodological errors because the authors attach 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.

2.3 Hypothesis

We argue that factors that lead people to choose SRI are both 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. Specifically, we test the

following hypotheses:

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 a process of aggregating data, the importance of

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

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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 relatively new item, 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

performance when it comes to choosing between socially responsible funds and

conventional funds. The current context is mainly influenced by the environmental, social

and governance issues. Awareness of 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 investors are willing to sacrifice

return to a certain percentage.

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

choose SRI products.

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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

(Barreda-Tarrazona et al., 2011). By integrating their personal values in their decisions,

social investors seek advisors who respect their choices (Statman, 2008) and familiar

with the principles of socially responsible investment.

3. METHODOLOGY

3.1 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 (SRI), Desjardins offers a range of investment products based on companies

whose practices emphasize their sense of social 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.

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As a research strategy, case study is often used as part of a study that raises questions of

"how" or “why” or 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, that is the role of the socially

responsible investment manager.

3.2 Data generation

We used secondary data and semi-structured interviews:

3.2.1 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 are those collected from the companies themselves

(Cowton, 1998). In our case, secondary data is collected from Dejardins. Such

information is very important and may be considered as private data as it comes from an

organizational archive and 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 (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 (Cowton, 1998) and overcome some difficulties like

social desirability (Fernandes and Randall, 1992; Randall and Fernandes, 1991). This

secondary data is gathered from an online survey: Desjardins Panel (2010), a web-based

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survey on perceptions relative to socially responsible investment (2008), and Desjardins

Panel (2012).

3.2.2 Interviews

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

In our study, we conduct focused-interviews (Merton, Fiske and Kendall, 1990).

Interviews are conducted in a short period and in a conversational manner (Yin, 2003,

p.90). The questions we asked concern the characteristics associated with those who

choose SRI products (demographic characteristics, socio-cultural values, attitudinal

(values based) characteristics, the role of the advisor in SRI investment and the

impediments investors are facing.

3.3 Variables, measures and analysis model

Although it strives mainly to highlight the factors associated with socially responsible

investing, three investor segments were identified for comparison:

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

of Desjardis 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

These three dependent variables 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.

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- ESG issues : ESG Profile. As for ESG profile, we combined seven 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, degree of

product knowledge, investment management style.

The figure 1 presents our analysis model.

Figure 1 : General analysis model

SRI holding

0.No

1.Yes

Age

Gender

Education

Occupation

Household size

Inst

itut

ion

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

Atti

tud

es

Tra

de-

offs

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3.4 Data analysis

The various analysis 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 is determined.

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 identify

separately, using the chi-square, 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.

4. FINDINGS

4.1 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 portfolios 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 just 12.5% while the holders of two portfolios (and Diapason and

Sociéterre) are only 2.9%.

19 | P a g e

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)

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

20 | P a g e

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).

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

demographic.

21 | P a g e

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

participants (n=893)

Characteristics N %

Values

ESG Profile

Reluctant 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 dissatisfied 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

Knowledge 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

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

Source: Desjardins Panel (2012).

22 | P a g e

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 noted 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.

4.2 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

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)

23 | P a g e

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.

Source: Desjardins Panel (2012).

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

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 are more likely to hold a Diapason portfolio,

but the differences are not significant.

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

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

group (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 are not significant.

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

significantly.

24 | P a g e

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 Societerre 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)

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 his advisor 6(9.4) 58(90.6) 0(0.0)

25 | P a g e

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.

Source: Desjardins Panel (2012).

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 differently the segments.

As 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 they tend to invest responsibly. ESG factors are

determining factors in socially responsible investment and also highlight the importance

of the context.

"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 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 are 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 special media, the prominence

of Twitter, 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. "

26 | P a g e

Another participant, a product manager, adds:

"I will say is that we have known scandals in recent years mainly at the 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).

People who have heard of product through advertising or articles (TV, newspapers,

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%). Though the overwhelming number of people in the

survey held the Diapason portfolios regardless of the level of knowledge of the advisor.

These results show the importance of the 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, it's more people who request that, than advisors or institutions will

promote these products. It really has to come from those people. Institutions still

have work to do to show that it 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 slogan: it's 50,000 people who invested in ethical funds,

so it can make a difference. Unity is strength. "(Financial Planner 2).

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

it is none the less true that they are insufficient to convince the customer. The role of the

advisor is also important mostly as part of an approach that emphasizes face-to-face.

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 portfolio Diapason (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 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 information sources are able 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 one of the three segments.

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, a significant relationship.

28 | P a g e

However, let's note that participants who expected an annual return of 8% and above

outnumber respectively in the 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.

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 address these

variables. To illustrate, the 2012 data did not address explicitly the risk aversion and the

percentage devoted to SRI in future investments of investors. Moreover, 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% moins élevé (n= 142 85,2 5,0 9,8

3% moins élevé (n=142 58,0 21,8 20,1

5% moins élevé (n+142) 34,4 33,7 31,8

10% moins élevé (n=142) 17,3 43,4 39,4

Source : Desjardins Panel, 2010

29 | P a g e

In the case of equal return, almost all Sociéterre investors choose the SRI option. 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 gradually as the difference between the yields increases. It rose from

0.4% in the case where yields were equal to 39.4% assuming a yield of SRI 10% lower

than that of conventional investment. The percentage of investors who chose SRI

decreases depending on whether the difference between the performance of SRI and that

of the conventional investment increases.

These results lead to several important conclusions:

- 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 that they incorporate 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 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

30 | P a g e

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 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)

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4.3 Segmentation based on multivariate analysis

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

portfolios holding.

Table 8. Hierarchical logistic regression of Sociéterre portfolio holding among

participants (n = 112)

Characteritics 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 of the product .12 .19

Recommendation of the product

No 0 0

Yes .76* .51

Role of the advisor

Heard about the product *

By 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**

32 | P a g e

Investment Management

Autonomous 0

Discuss with the advisor -1.11

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: The numbers refer to regression coefficients, * p <0.05, ** p <0.01, *** p <0.001

Source: Desjardins Panel (2012).

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

predicts will be part of the group he belongs 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 variables of type "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 of type "attitudes", slightly increased the

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

33 | P a g e

recommended the product are more likely to hold a portfolio Sociéterre (p <0.05). 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.

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-demo. 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

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Satisfaction of the product -.18 -.23

Recommendation of the product

No 0 0

Yes -1.01** -.73

Role of the advisor

Heard about the product *

By 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-deux (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

Source: Desjardins Panel (2012).

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. Except that

these differences are not significant (p> 0.05). Household size is still significant in the

presence of ESG profile (p <0.05).

35 | P a g e

In the third step, the introduction of type variables "trade-offs" 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.

The addition of Block 4 consisting of variables of type "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 adviser 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 article 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.

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

in general and the expected returns are still significant. Regarding more specifically the

ESG profile, this is consistent with the motivations that incite or could incite participants

to invest responsibly:

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"Because, I want to invest my money in a responsible fund. I would be really

unfortunate that my money be used to make weapons or cigarettes, for example "

(Panel Desjardins, Open-ended questions, 2010)

"I wish my investments were a reflection of my values." (Panel Desjardins,

Open-ended questions, 2010)

"Because it matches my personal values" (Panel Desjardins, Open-ended

questions, 2010)

"To encourage companies that manage their business responsibly, ethically and

who is an environmental concern, and not to encourage others ... I'm like "fair

trade" ... ;-) " (Panel Desjardins, Open-ended questions, 2010)

"This portfolio represents my ethical and environmental values" (Panel

Desjardins, Open-ended questions, 2010)

"I wanted my money be invested in companies that look beyond just the next

quarter's results, who see the future of the planet or people is important too."

(Panel Desjardins, Open-ended questions, 2010)

"I like how ethical and environmentally responsible" (Panel Desjardins, Open-

ended questions, 2010)

"I am only Interested in investing in funds That Have a socially responsible

profile." (Panel Desjardins, Open-ended questions, 2010)

"I wanted to invest in the Environment Fund, which I found myself doing research

on the Desjardins Web site and that met my personal criteria in terms of ethics

and respect for the environment. However, after meeting with my advisor, we

realized that this background does not fit my investment profile. She therefore

suggested a portfolio instead Sociéterre Environment Fund, and I invested in this

portfolio. " (Panel Desjardins, Open-ended questions, 2010)

"Because I'm tired that large companies and particularly their leaders, being

amazed by the pockets without regard for the community." (Panel Desjardins,

Open-ended questions, 2010)

"I want to place some of my assets as a gesture by social, environmental and

solidarity. I want the fund managers do pressures for companies to make ethical

choices, environmental and socially. " (Panel Desjardins, Open-ended questions,

2010).

"I like its ethical and environmental aspects" (Panel Desjardins, Open-ended

questions, 2010)

37 | P a g e

"I am only interested in investing in funds that have a socially responsible

profile." (Panel Desjardins, Open-ended questions, 2010)

"I wanted to invest in the Environment Fund, which I found myself doing research

on the Desjardins Web site and that met my personal criteria in terms of ethics

and respect for the environment. However, after meeting with my advisor, we

realized that this background does not fit my investment profile. She, therefore

suggested a Sociéterre portfolio instead of Environment Fund, and I invested in

this portfolio. " (Panel Desjardins, Open-ended questions, 2010)

"Because I'm tired those large companies and particularly their leaders are amazed

by their pockets without regard for the community." (Panel Desjardins, Open-

ended questions, 2010)

"I want to place some of my assets as a gesture for social, environmental and

solidarity. I want the fund managers do pressures for companies to make ethical

environmental and social choices. " (Panel Desjardins, Open-ended questions,

2010)

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 Sociéterre

holding among participants (n = 893)

Characteristics Societerre 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 *** ***

By my advisor 0 0

By advertising, article 2.12(8.34)** -2.15(.12)**

Through brochure, leaflet .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-deux (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

Source: Desjardins Panel (2012).

38 | P a g e

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

those reluctant about ESG.

Respondents who heard of the product by advertising and news article are 8 times more

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

Similarly, respondents who have heard of the product via Internet are eight (8) 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.

5. DISCUSSION

5.1 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 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 management

investment and the fact that they most frequently use advertising and the Internet as

sources of information on socially responsible investment.

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

prominent in regard to environmental concerns, compared to those older.

39 | P a g e

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. Women seem more ready to invest in a

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.

5.2 The importance of social values and financial returns

5.2.1 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 (portfolios

Societerre) and with respect to the analysis applied to the holders of traditional

investment portfolio (Diapason Portfolios) . The same finding applies as part of the

parsimonious model. However, it is worth noting a significant difference in the meaning

of ESG factors:

- Enthusiastic are more inclined to invest in a Sociéterre portfolio than reluctant.

- The enthusiastic, interested and the warm are less likely to invest in a Diapason

portfolio than reluctant.

- Enthusiastic are 66 times more likely to hold a portfolio Sociéterre than the

reluctant.

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

responsible portfolio holding. In other words, environmental and governance concerns

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

40 | P a g e

These results validate the hypothesis that indicates 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 the

ethical and social issues are crucial in the choices focused on SRI. However, it is

important to note that the operation of selecting ESG issues as particularly important in

terms of investment decision (McLachlan and Gardner, 2004) is not sufficient to explain

why these factors are crucial in the choice of investment decision. The concepts of

"attitude-Behaviour Gap 'or' values-action gap" developed by Young et al. (2010) are

important for understanding this discrepancy. 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 decision. 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 means that they

are all, to varying degrees, concerned about the environmental, social and governance

issues.

5.2.2 The expected return

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

traditional investment portfolios holders. However, as noted above, it is at 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, first, that social investors still care about returns and, secondly, that despite a

priori reluctance, they remain convinced that their portfolios will perform as much or

more than traditional portfolios.

The fact that both SRI portfolios holders and 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

41 | P a g e

of investors beyond a certain rate of return between SRI and the conventional investment

shows the tough choices and sometimes conflicting motivations that exist between the

economic and financial aspects.

5.3 The role of the institution

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

"knowledge level" in SRI variables. Thus the fact of having heard of the product by

advertising/ article or Internet increases the chance to hold a Societerre 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 more

or less high education levels explains the predominance of the use of advertising and

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

holders belong in their majority, to the "enthusiastic ESG" profile and have an

independent management style, thus explaining why they are less inclined to contact

advisors as part of their investment management.

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 less likely to hold a Sociéterre portfolio than

respondents who somewhat agree. This calls into question the knowledge of the advisors

in SRI. 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 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.

42 | P a g e

6. CONCLUSION

6.1 Implications

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 several factors and socially

responsible investment further demonstrates the complexity surrounding this

phenomenon. The feature of SRI, as argued by Statman (2008), is the mix of utilitarian

nature factors (performance, risk, liquidity, taxes, etc.) with expressive nature factors

(patriotism, character social prestige) 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. 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 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, crossing

43 | P a g e

demographic, generational membership, etc. with the social values of individuals, the

trade-offs they operate in, 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 principles

knowledge of socially responsible investment and integration of social values in

approaching customers.

6.2 Limitations and research avenues

Our research has a number of limitations. Apart from the number of missing cases in

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

the percentage that investors (both conventional and social) 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 investment) 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 the regions, culture, level of economic

development etc. Such research might address the particular socio-political and

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

of marketing strategy, it would be appropriate to explore how the integration of ESG

44 | P a g e

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.

45 | P a g e

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