The Influence of Branding on Investment Decisions under Uncertainty: A Behavioral Finance Perspective on Investors in Renewable Energy Stocks

Reducing dependence on fossil fuels and mitigating climate change are important policy objectives in Switzerland and around the world. Accelerating the deployment of renewable energy resources is one way of contributing to those objectives. This requires substantial public and private investments. According to the International Energy Agency (IEA) the change to power production from renewable energy and the increase in energy efficiency will require about $9.3 trillion additional investment within the next two decades.

These investments are subject to considerable uncertainty for a number of reasons, including the volatile price of oil, ongoing technology development and uncertainties related to public policies. Government support can be important to facilitate the growth of renewable energy markets, but unclear objectives and stop-and-go policies have also been shown to have a negative influence on private investment. The fact that renewable energy technologies are often commercialized by relatively young firms adds another uncertainty to investors, which is a lack of information about historic financial performance. The level of uncertainty varies between different types of renewables. Compared to more established renewable energy types such as wind energy, which is cost-competitive with conventional sources of electricity in certain locations, solar photovoltaics is characterized by a lower technological maturity and therefore increased technology, market and policy risk.

Despite the fact that investors increasingly look beyond conventional technologies and invest in renewable energies, the role of the financial market with regard to the acceptance of renewable energy innovation is still an under-researched field. Therefore, the main research questions of this project are as follows:

- How do investors cope with the increased risk and future uncertainty associated with investments in renewable energies in general and particularly in early stage technologies such as photovoltaics?
- What measures or heuristics do investors use in this situation?
- What role does a company's brand play in decreasing perceived risks?

We respond to these questions by applying findings from consumer behavior and branding research to investment decisions in renewable energies. We take a behavioral finance perspective and investigate how brands influence the risk-return assessment and final investment choice of investors.