Private-sector investor’s intention and motivation to invest in Land Degradation Neutrality
In this study, "Private-sector investor’s intention and motivation to invest in Land Degradation Neutrality" the authors aimed at explaining private-sector investors’ intention to invest in Land Degradation Neutrality (LDN) and analysing their motives for making investments that promote sustainable development. Regarding the actual intention to invest in LDN, the majority of investors showed rather weak intention to make investments that promote LDN in the near future. Interestingly, this weak intention to invest in LDN contrasts with investors’ relatively strong opinion on land degradation being a great danger to nature and humans, which also remains when comparing land degradation to other sustainable development goals (e.g. to end poverty or to promote peace). The combination of investors’ large concern about land degradation and the positive attitude towards LDN/investing sustainably with their weak intention to invest, can be seen as further evidence for the ‘sustainable investing gap’ and investors’ general uncertainty regarding investment into natural resources (incl. ‘land’-based investments)
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Within the frame of this study, positive attitude reflected the investor’s belief that :
- LDN-based investments are a promising solution to combat land degradation and promote sustainable development in the long-term,
- investing in sustainable investment products will yield both a high financial return and have a positive impact, and
- investment products based on the LDN concept could be an attractive investment opportunity.
Strong attitude-intention relationships have also been found in many other TPB-based studies . and are generally important for encouraging and integrating sustainability into behavior . It is important to keep in mind that sustainable investments and especially LDN are relatively new investment opportunities, which might still be perceived as risky and uncertain. Nevertheless, we argue based on our SEM results that there is great potential in promoting a positive attitude towards LDN/investing sustainably in order to reinforce investors’ attitude-intention relationships.
Investors’ knowledge about LDN and investing sustainably was a good predictor of intending to invest in LDN. Yet there is a commonly found lack of knowledge and awareness about the cross-cutting and long-term consequences of land degradation, which is one of the key drivers of land degradation in the first place (e.g. in supply systems)
Therefore, uncertainty and lack of knowledge about the causes and effects of land degradation could impede investors’ intention to invest in LDN and further prevent potential involvement.
Addressing lack of knowledge and awareness about land degradation/LDN is essential, because investing sustainably is less likely the more barriers and uncertainty investors perceive between them and potential objects of investment Thus, spreading awareness and providing knowledge can be viewed as key factors for encouraging investors to invest in LDN.
Furthermore, we found that knowledge had highly significant positive relationships with :
- impact investors,
- investors who had closeness with the asset class ‘land’ (closeness-investors) and
- investors who perceived themselves as victims of land degradation (victim-investors). We hypothesize that all three investor types (impact, closeness- and victim-investor) are already in a position which makes them more likely to acquire more knowledge about land degradation/LDN/investing sustainably than their counter-types (traditional investors, non-closeness and non-victims-investors). However, further research is needed to investigate this relationship.
The study suggests practical measures on how to best encourage private-sector investors to invest in LDN and, more generally, in sustainable development. This includes suggestions for how favourable circumstances can be created for investors intending to invest in emerging LDN financing vehicles:
To encourage investors to make sustainable investments that promote LDN, the first step is to promote a clear and basic understanding about :
- the issue of land degradation,
- how the adverse effects of land degradation might negatively affect private sector investors themselves and their businesses,
- LDN as an effective solution to combat land degradation,
- LDN as an investment opportunity with long-term expected return and a risk which is similar to that of other investments of similar time horizon, and
- how investors can practically invest sustainably in LDN. Given the lack of knowledge and the high uncertainty that still surrounds the issue of land degradation, this requires above all improved and strengthened knowledge management, translation and transfer about land degradation itself.
As the determinants of the intention and the motivation to invest sustainably do not substantially differ across different investor types, investors should be targeted as a uniform group. Emphasis should be placed on the psychological determinants they commonly share, rather than on the type-specific characteristics that may distinguish different investor types.
That said, impact investors, investors who have natural resources (incl. land) as part of their investment strategy, and investors who perceive themselves as negatively affected by land degradation are still more likely to invest in LDN and thus are recommended as target groups.
- Attracting investors to engage in investing sustainably might strongly require the promotion of a consciousness for sustainability, for example by raising concern, evoking a sense of responsibility for future developments and highlighting the positive impact sustainable investments can have.
- Likewise, investors’ motivation to sustainably invest can be triggered by generating an emotional attachment to the investment object (e.g. stressing how the positive outcomes of investing sustainably would benefit their significant ones).
- In the context of sustainable investments, the prospect of long-term financial returns must be provided for investors, while short-term financial returns play a subordinate role.
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