Climate Transition Beliefs

We study an overlooked driver of heterogeneity in green investment behavior: differences in expectations about the long-term trajectory of the energy transition (climate transition beliefs). Drawing on a survey of U.S. retail investors, we document considerable heterogeneity in climate transition beliefs at different long-term horizons. Transition optimism is positively associated with expected green financial performance and preferences for green investments, particularly among investors without strong pro-environmental attitudes. Two preregistered survey experiments provide causal evidence that transition beliefs play a key role in shaping green return expectations and investment decisions. Distinguishing between heterogeneous beliefs and preferences is crucial for a better understanding of the motivations behind green investment behavior.

This paper was accepted by Caroline Flammer, sustainability.

Funding: This work was supported by the Universität St. Gallen Basic Research Fund [Grant 2130787].

Supplemental Material: The online appendix and data files are available at https://doi.org/10.1287/mnsc.2025.00564.