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Description: In this paper, we run a large-scale field experiment to tackle the hypothetical gap in the context of sustainable investing. Specifically, we look at a large Dutch pension fund in which participants do not make their own investment choices but the pension fund decides on behalf of its participants. It currently pursues sustainability of its investments by explicitly following three of the United Nation’s 17 Sustainable Development Goals (SDG); we elicit whether this engagement is in alignment with the preferences of its plan participants. The compelling nature of our experiment is that it employs a simple, clean, and easy-to-understand setup. We employ a 2x2 design that divides the survey respondents into hypothetical vs real choice and into current vs future policy. Plan participants face a dichotomous choice where they choose whether their pension fund should focus more or less on sustainable investing. In the real choice treatment, a majority rule is employed. If more than 50% are in favor of changing the strategy, the fund will comply with the decision. In the hypothetical treatment, respondents are only asked to state their opinion. The current policy presents three SDGs as the status quo and participants can add one which would mean that the fund increases its focus sustainable investments. The future policy presents four SDGs as status quo and participants can omit one. Thus, all participants can choose between three or four SDGs. The distinction between real and hypothetical choices allows us to study the hypothetical gap. Switching between current and future status quo enables us to study how the hypothetical gap is connected to the status quo bias. We expect to see a significant difference between hypothetical and real choices where participants in the hypothetical choice treatment will opt for four SDGs significantly more often than participants in the real choice treatment. One of the main reasons for this wedge is the urge of people to give socially desirable answers. As participants in the hypothetical treatment do not have to expect any consequences, they can give in to this urge more freely and disregard potential costs more easily. The hypothetical gap poses a great challenge to policy makers and institutions alike who cannot always grant real choices but must rely on hypothetical survey responses in many situations. In our paper, we aim to offer an analytical way to increase the value of hypothetical answers by bringing them closer to real choices.


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