Does the EU Taxonomy for Green Investments affect Investor Judgment? An Experimental Study of Private and Professional German Investors

This study experimentally examines the effect of different types of environmental information on investors’ judgment regarding long-term investments. Based on three experimental cases (financial; financial & additional common environmental; financial & additional common environmental & additional taxonomy-aligned in-formation), we conducted two experimental investigations where on the one hand professional investors and on the other hand private investors were asked to eval-uate long-term investments. Our findings show that additional commonly disclosed environmental information (in case two) and additional taxonomy-aligned infor-mation (in case three) affect the investment-related judgment of professional as well as private German investors. With this experimental approach we get insights into investors’ information processing. We find evidence that EU taxonomy-aligned information has an impact on investment-related judgments but differs be-tween investor types. If we assume that the EU taxonomy shows actual environ-mental performance, our results indicate that the taxonomy-aligned information is helpful for professional investors as they recognize and penalize negative infor-mation. In contrast, private investors reward environmental information in any case, even if taxonomy information is negative. If we argue with signal theory, this suggests that when private investors recognize environmental information, it gener-ally sends positive signals to private investors, but uncertainty and complexity in information processing can be assumed