Green investments look less risky when investors care about more than money

It turns out that when investors care about social impact, they are more willing to put money into projects with uncertain financial returns. This means more money could flow into green finance, even for projects where the exact financial payoff is hard to predict.

For years, green projects struggled to attract enough money because their financial returns were often hard to predict, making them seem too risky. This paper shows that if investors also care about the social good, they will accept more financial uncertainty. This could unlock significant private capital for climate solutions that were previously considered too ambiguous for traditional finance.