In an article “Sustainable Financial Literacy and Preferences for Sustainable Investments among Young Adults” written by Varmaz, Armin; Riebe, Katharina; Hegner, Sabrin (2021), researchers delved into the preferences of students when it comes to sustainable fund investments. Their findings shed light on two critical observations. First, the enduring principle in financial economics – the trade-off between return and risk – remains paramount. Students have a clear preference for global ESG (Environmental, Social, and Governance) funds that offer higher returns with lower associated risks.

Secondly, the article underscores the influence of latent factors in shaping these preferences. Attitudes, concerns, personal traits, financial literacy, and risk aversion all contribute significantly. Researchers also examined how observable characteristics and the context in which students make these decisions impact their choices. For example, students who prioritize low-risk investments with a positive ESG impact are more likely to opt for ESG funds. Similarly, students who value ESG factors in their direct investments tend to favor ESG funds. Among personal traits, conscientiousness emerges as a significant factor in ESG fund selection.

Interestingly, the article challenges the notion that sociodemographic characteristics play a significant role in determining preferences. Instead, it suggests that latent characteristics among students, such as behavioral traits, have a more profound influence on their investment choices. This research provides valuable insights into the complex landscape of sustainable investments and highlights the significance of individual factors in shaping investment decisions.