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Flooded friends - peer effects in insurance decisions
Felix Dornseifer
Goethe University Frankfurt, Germany
Discussant: Olaf Korn (University of Göttingen)
This paper explores how peer effects influence homeowners' decisions to insure against elemental damages. Using Facebook friendship links to flooded areas, it finds that stronger social ties increase insurance purchases in non-flooded regions: a doubling of social ties leads to a 1.2% rise in policies covering elemental damages. It highlights the moderating role of regional climate policy attitudes and social capital, showing that bridging (bonding) capital weakens (strengthens) the effect. This contributes to understanding how social capital and climate attitudes shape household responses to climate risks.
10:00am - 10:30am
Determinants and forecasting of corporate greenwashing behavior
Jens Eckberg1, Gregor Dorfleitner1,2,4, Manuel Kathan3,4,5, Sebastian Utz3,4
1Department of Finance, University of Regensburg; 2Centre for European Research in Microfinance (CERMi), Belgium; 3Department of Climate Finance, University of Augsburg; 4Centre for Climate Resilience, University of Augsburg; 5Swiss Institute of Banking and Finance, University of St. Gallen
Discussant: Felix Dornseifer (Goethe University Frankfurt)
This paper empirically analyzes the drivers of corporate greenwashing behavior to enhance the forecasting and mitigation of greenwashing practices, particularly in the context of stakeholder decision-making. Using company-level characteristics of a sample of STOXX Europe 600 constituents, we show that ESG ratings have a U-shaped relationship with greenwashing, indicating that greenwashing is more likely for companies with low and high ESG ratings. Additionally, environmental score, company size, cash-to-assets, and capital intensity are positively correlated with greenwashing. Furthermore, greenwashing behavior is more prevalent in consumer-related industries than in other industries. After identifying the determinants of greenwashing, we investigate the forecasting of greenwashing behavior using machine learning models based on economic considerations.
10:30am - 11:00am
The influence of uncertain environmental impact on risk taking in asset allocation
Oliver Frensch, Olaf Korn, Holger A. Rau
University of Göttingen, Germany
Discussant: Jens Eckberg (University of Regensburg)
This pre-registered online experiment examines how environmental impact uncertainty influences asset allocation decisions. Our experiment precisely controls the environmental impact risk by linking investment decisions to the retiring of CO2 emission certificates. Results show that most participants adjust their investment strategies when confronted with impact risk, especially when such risks affect financially safe assets. Highly risk-averse investors show the strongest reduction of investments in impact-risky assets. We provide causal evidence that such modifications in investment behavior stem from changes in risk perceptions. These findings suggest the need for enhanced risk assessment frameworks that integrate environmental impact uncertainty in financial decision-making.
