Sailing the Green Wave: Revealing the Robo-Advisor’s Industry in the Age of Sustainable Finance

The financial sector is undergoing a transformation to prepare for a more digitalised and sustainable future. Financial institutions are seeing an increase in the use of robo-advisors (RA) as a cost-effective way to receive financial advice. RAs use objective algorithms throughout the portfolio selection process to reduce the impact of behavioural biases and increase transaction efficiency. The end products have more credibility as objective algorithms have been used in the portfolio selection process. These platforms allow users to diversify their portfolios and include not only Exchange Trading Funds (ETFs) but also sustainable products. Previous studies analysed functioning of RA services in conjunction with traditional financial advisors and the mechanisms through which to enhance human–robot interactions to improve user experience. Despite this interests in this field, the research is so far from maturity. By adopting a qualitative analysis of nine robo-advisor platforms, namely Vanguard, Betterment, Wealthfront, Axos Invest, E*Trade Core Portfolios, Ellevest, Merrill Guided Investing, Acorns, and Ally Invest Robo Portfolios, it was possible to explore how due to the increased demand for Environmental, Social and Governance (ESG) and Socially Responsible Investments (SRI) the new RA platforms have changed their business model. The results of this study highlight the different strategies of the platforms analysed and shed light on all their advantages and disadvantages. The research conducted provides in terms of theoretical and practical implications an understanding evolution that RAs can lead within the conventional green financial system.