Dirty Air and Green Investments: The Impact of Pollution Information on Portfolio Allocations

We study the role of access to local pollution information as a means of pushing investors to make greener portfolio allocations, exploiting the rollout of air quality monitoring stations in India. Using a triple-differences framework on trading records of 19 million investors, we show that retail investors’ holdings in “brown” stocks become negatively related to local pollution, but only after a nearby station appears. This effect is pronounced on “alert” dates when air quality is reported as harmful. These patterns stem from brown stock divestments, not green stock purchases. The effect is strongest among tech-savvy investors likely “treated” by real-time pollution data, and younger investors more sensitive to environmental concerns. Our results provide micro-level evidence that targeted information dissemination can effectively shift investors towards greener portfolios, offering insights for how policymakers may promote sustainable investing.

https://www.bschool.cuhk.edu.hk/events/dirty-air-and-green-investments-the-impact-of-pollution-information-on-portfolio-allocations/