Unlocking sustainable investing through digital financial literacy: the impact of advanced digital skills

Purpose: This paper aims to investigate whether and how different levels of digital financial literacy (DFL) foster sustainable investing. Design/methodology/approach: The authors use a large, representative sample of more than 5,000 Italian households (Edufin Report, 2023), representing individuals responsible for managing the family finances. A principal component analysis (PCA) is used to assess respondents’ DFL, which reflects self-reported confidence in conducting financial transactions through digital devices. The paper adopts probit models to investigate the link between DFL and holding at least one sustainable asset in households’ portfolio while controlling for certain socio-demographic and behavioural variables. Findings: The results show that DFL has a positive and significant effect on the likelihood of holding sustainable investments, but only among investors with advanced digital skills that enable them to manage sophisticated financial activities (e.g. investing or pension management). The results are robust to alternative measures of DFL and to endogeneity concerns. In particular, the most predictive measures of DFL relate to investors’ behaviours and attitudes towards, rather than awareness of, digital financial services. The behavioural dimension is further supported by the positive association between sustainable investment holding and self-assessed financial literacy, optimism and overconfidence. Originality/value: To the best of the authors’ knowledge, this is the first study to empirically connect DFL to sustainable investment holdings among individual investors. Building on previous insights on digitalisation and sustainability in the business context, this study identifies DFL as a critical enabler of households’ sustainable investments. This study provides new evidence on how promoting advanced digital skills can foster financial inclusion and support the uptake of environmental, social and governance investments among households.