Sustainable finance literacy predicts investment behavior beyond general financial literacy: Evidence from two representative samples

Sustainable finance literacy (SFL) is emerging as an essential complement to traditional financial literacy, crucial for enhancing sustainable investments that play a key role in addressing climate change and enabling individuals to avoid greenwashed products. Using two large-scale, preregistered studies with representative Austrian samples (prestudy: N = 1,047; main experiment: N = 1,510), we develop a comprehensive inventory to measure SFL and examine its associations with investment behavior. We use a preparatory study to develop and validate the SFL inventory, which is then applied in an incentivized framed field experiment and in self-reported investment measures. Higher SFL is associated with an 18.7-percentage-point increase in stock market investment, a 25.1-percentage-point increase in sustainable investments, and a 13.4-percentage-point decrease in allocations to potentially greenwashed assets as well as an improved ability to identify such products. Furthermore, SFL adds explanatory power beyond general financial literacy for both experienced investors and non-investors. Our findings underscore the relevance of SFL for current discussions on financial education and policy measures aimed at supporting sustainable finance and protecting investors from deceptive sustainability claims.