Expectations About Others' Values and Actions Drive Green Pension Preferences By Shaping Efficacy Beliefs

Technical Summary: Expectations About Others' Values and Actions Drive Green Pension Preferences By Shaping Efficacy Beliefs

Problem Statement
Pension funds represent a massive pool of global capital with significant environmental consequences. While many jurisdictions (notably under the "prudent person rule" in the Netherlands and proposed EU revisions) allow funds to incorporate beneficiary sustainability preferences, the nature of these preferences remains unclear. Existing literature suggests that green investment choices are driven primarily by personal biospheric values (the importance placed on protecting nature). However, this view may be incomplete. The authors argue that for a collective endeavor like pension investing, personal values may not translate into action if individuals doubt the efficacy of their contribution. Specifically, the study investigates whether green pension preferences are driven solely by values or if they are mediated by efficacy beliefs—specifically, the belief that one's own investment can reduce climate change (personal outcome expectancy) and the belief that enough others will also choose green funds (collective efficacy).

Methodology
The study employed a preregistered online survey design with a sample of 531 Dutch adults recruited from a stratified panel (PanelInzicht) to approximate the national population.

• Experimental Task: Participants engaged in a hypothetical pension allocation task. They were asked to distribute pension contributions between a "Green" fund (sustainable, low-carbon, lower return) and a "Brown" fund (conventional, high-carbon, higher return). The task embedded an explicit return–emissions trade-off (2.02% vs. 2.72% return) to prevent purely financial motivations.
• Conditions: Participants completed the allocation task four times, varying the beneficiary: (1) the collective (all Dutch pensioners), (2) themselves, (3) another Dutch person, and (4) their future self.
• Measures:
  • Values: Measured using a shortened Portrait Values Questionnaire (PVQ) to assess personal biospheric values and perceived biospheric values of the "average Dutch person."
  • Efficacy Beliefs: Assessed via single-item scales for personal outcome expectancy (belief that one's own investment helps), collective efficacy (belief that many others will choose green funds), and collective outcome expectancy.
• Analysis: Structural Equation Modeling (SEM) using the lavaan package in R was used to test a serial mediation model. The hypothesized chain was: Perceived Group Values → Collective Efficacy → Personal Outcome Expectancy → Green Fund Allocation.

Key Results
The study found distinct psychological mechanisms depending on whether participants decided for themselves or for others.

1. Deciding for Oneself (Self, Future Self, Collective):

   • The serial mediation model fit the data well. Personal environmental values predicted green allocation both directly and indirectly.
   • Crucially, personal outcome expectancy (the belief that one's own investment reduces climate change) partially mediated the relationship between personal values and allocation, operating alongside a significant direct effect of values.
   • Collective efficacy (belief that others will act) was the primary driver of personal outcome expectancy. Perceived group values influenced collective efficacy, which in turn shaped personal outcome expectancy.
   • Perceived group values had no direct effect on allocation; their influence was entirely channeled through efficacy beliefs. This suggests that for personal decisions, others' values matter not as social pressure, but as informational cues regarding the potential impact of the action.
   • Personal outcome expectancy predicted allocation as strongly as personal values did.

2. Deciding for Another Person:

   • The serial mediation model did not fit the data for allocations made on behalf of another person.
   • A modified model revealed a different pathway: Perceived group values predicted allocation directly (bypassing efficacy beliefs).
   • In this context, personal values had a negative direct effect on allocation for others, while the serial path through efficacy remained positive but weaker.
   • This indicates that when deciding for others, participants relied on the assumption that the recipient's preferences align with their perceived values, rather than engaging in complex efficacy calculations.

3. Pluralistic Ignorance:

   • Participants systematically underestimated the environmental values of the average Dutch person (perceived values were lower than personal values). This misperception likely dampened collective efficacy and, consequently, support for green investing.

Key Contributions

• Mechanism Identification: The paper identifies that green pension preferences are not merely a readout of personal values but are heavily dependent on efficacy beliefs. Specifically, the belief that "enough others will act" (collective efficacy) is a prerequisite for individuals to believe their own action will be effective (personal outcome expectancy).
• Distinction from Social Influence: The study demonstrates that in private, collective contexts like pension investing, perceptions of others' values function as information about feasibility (efficacy) rather than as a mechanism for social conformity (social influence).
• Contextual Nuance: The research highlights a critical divergence in decision-making logic: individuals use efficacy-based reasoning for their own future but rely on direct value projection when deciding for others.

Significance and Claims
The authors claim that understanding green pension preferences requires looking beyond the measurement of personal values to the efficacy beliefs and perceptions of others upon which those preferences rest.

• For Policy and Practice: Pension funds that interpret survey responses as a direct reflection of values risk misjudging beneficiary support. Support for sustainable investing may be low not because beneficiaries lack environmental concern, but because they doubt the collective efficacy of the action.
• Intervention Potential: Because the study found evidence of pluralistic ignorance (underestimating others' green values), correcting these misperceptions could be a viable strategy to boost collective efficacy and, subsequently, green pension allocations.
• Managerial Implications: Pension fund managers, who often decide on behalf of beneficiaries, may underestimate support for sustainability because they project their own (often higher) values onto beneficiaries or assume beneficiaries care less than they do. Correcting these managerial beliefs is as critical as correcting beneficiary beliefs.

The paper concludes modestly, noting that while the findings are robust within the study's design, the reliance on hypothetical allocations and the specific "double collective" nature of pension investing (where both the mechanism and the goal require mass participation) suggest that these efficacy pathways may be specific to such contexts and may not generalize to more visible, individually feasible sustainability actions (e.g., buying an EV).