What drives sustainable investing? Adoption determinants of sustainable investing exchange-traded funds in Europe

Adam Marszk and Ewa Lechman

Structural Change and Economic Dynamics, 2024, vol. 69, issue C, 63-82

Abstract: Despite the growing interest in various topics related to sustainable (ESG) investing, some issues remain understudied, such as the determinants of their utilization at the macro level. This paper contributes to the state of knowledge two-directionally. First, it shows the development of sustainable investing exchange-traded funds (ETFs) in European countries. Second, it traces the significant determinants of adopting sustainable investing/ESG ETFs in Europe. More specifically, we aim to determine which financial, technological, social or institutional factors have the most significant impact on the growth of levels and over-time dynamics of the sustainable investing ETFs. The empirical sample covers five European economies: France, Germany, Italy, Switzerland, and the United Kingdom and the period of the analysis is 2006–2020. Adopting panel regression analysis, we investigate twenty different variables that potentially impact the development of sustainable investing ETFs across examined countries. Our results confirm the positive effects of the development of insurance companies and pension funds for the assets of the ESG ETFs. Also, factors such as stock markets development, ICT adoption, financial access and literacy, and the prevalence of tertiary-level education demonstrate a positive impact on ESG ETFs. The role of the financial performance and tax levels resulted in being neutral, thus indicating the lesser importance of the financial motives in relation to the other factors. The results were mixed in the case of the mutual funds and institutional variables.

Keywords: Exchange-traded funds; ETFs markets; Sustainable investing; ESG investing; Financial markets; Information and communication technologies (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:streco:v:69:y:2024:i:c:p:63-82

DOI: 10.1016/j.strueco.2023.11.018

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