Green Preference, Green Investment This paper examines whether individual investors’ green preference will be reflected in their investment decisions. It provides compelling evidence that individuals with stronger green preference invest more in green mutual funds, influenced by concerns over the physical and regulatory risks of climate change. It suggests that this behavior is not driven by financial incentives as preference-related investments may not always lead to financial gains from trading. About the Asian Development Bank ADB is committed to achieving a prosperous, inclusive, resilient, and sustainable Asia and the Pacific, while sustaining its efforts to eradicate extreme poverty. Established in 1966, it is owned by 68 members —49 from the region. Its main instruments for helping its developing member countries are policy dialogue, loans, equity investments, guarantees, grants, and technical assistance. GREEN PREFERENCE, GREEN INVESTMENT Zhenyu Gao, Yan Luo, Shu Tian, and Hao Yang NO. 722 April 2024 ASIAN DEVELOPMENT BANK 6 ADB Avenue, Mandaluyong City 1550 Metro Manila, Philippines www.adb.org ADB ECONOMICS WORKING PAPER SERIES ASIAN DEVELOPMENT BANK ADB Economics Working Paper Series Green Preference, Green Investment Zhenyu Gao, Yan Luo, Shu Tian, and Hao Yang No. 722 | April 2024 The ADB Economics Working Paper Series presents research in progress to elicit comments and encourage debate on development issues in Asia and the Pacific. The views expressed are those of the authors and do not necessarily reflect the views and policies of ADB or its Board of Governors or the governments they represent. ASIAN DEVELOPMENT BANK Zhenyu Gao (gaozhenyu@baf.cuhk.edu.hk) is an associate professor at Chinese University of Hong Kong. Yan Luo (luoyan@fudan.edu.cn) is a professor and Hao Yang (17210690042@fudan.edu.cn) is a PhD candidate at Fudan University. Shu Tian (stian@adb. org) is a senior economist at the Economic Research and Development Impact Department, Asian Development Bank.  Creative Commons Attribution 3.0 IGO license (CC BY 3.0 IGO) © 2024 Asian Development Bank 6 ADB Avenue, Mandaluyong City, 1550 Metro Manila, Philippines Tel +63 2 8632 4444; Fax +63 2 8636 2444 www.adb.org Some rights reserved. Published in 2024. ISSN 2313-6537 (print), 2313-6545 (PDF) Publication Stock No. WPS240238-2 DOI: http://dx.doi.org/10.22617/WPS240238-2 The views expressed in this publication are those of the authors and do not necessarily reflect the views and policies of the Asian Development Bank (ADB) or its Board of Governors or the governments they represent. ADB does not guarantee the accuracy of the data included in this publication and accepts no responsibility for any consequence of their use. The mention of specific companies or products of manufacturers does not imply that they are endorsed or recommended by ADB in preference to others of a similar nature that are not mentioned. By making any designation of or reference to a particular territory or geographic area in this document, ADB does not intend to make any judgments as to the legal or other status of any territory or area. This publication is available under the Creative Commons Attribution 3.0 IGO license (CC BY 3.0 IGO) https://creativecommons.org/licenses/by/3.0/igo/. By using the content of this publication, you agree to be bound by the terms of this license. For attribution, translations, adaptations, and permissions, please read the provisions and terms of use at https://www.adb.org/terms-use#openaccess. This CC license does not apply to non-ADB copyright materials in this publication. If the material is attributed to another source, please contact the copyright owner or publisher of that source for permission to reproduce it. ADB cannot be held liable for any claims that arise as a result of your use of the material. Please contact pubsmarketing@adb.org if you have questions or comments with respect to content, or if you wish to obtain copyright permission for your intended use that does not fall within these terms, or for permission to use the ADB logo. Corrigenda to ADB publications may be found at http://www.adb.org/publications/corrigenda. Notes: In this publication, “CNY” refers to yuan. ADB recognizes “China” as the People’s Republic of China and “Hong Kong” as Hong Kong, China. ABSTRACT Based on Alibaba’s renowned “green” initiative, the Ant Forest program, we develop a novel measure to reveal an individual investor’s nonpecunia