The influence of ESG initiatives on the decisions of qualified investors
DOI:
https://doi.org/10.1590/1808-057x20252307.enKeywords:
reputation, financial performance, ESG initiatives, intention to invest in stocks, qualified investorsAbstract
This article examines the relationship between investors’ perceptions of companies’ environmental, social, and governance initiatives and their intention to invest in stocks. In addition, it tests reputation and financial performance as antecedents of investors’ perceptions of those initiatives, as well as the moderating effect of risk aversion on the relationship between them and the intention to invest in stocks of environmental, social, and governance (ESG) companies. There is still a lack of studies that, from a behavioral perspective, address the relationship between ESG initiatives and intentions to invest in stocks. ESG initiatives have attracted growing interest in investment decisions and, by extension, in the business landscape. The results provide insights for financial institution managers to direct their efforts toward offering ESG-identified products and to guide companies in managing their reputations under ESG dimensions. The approach is quantitative and descriptive, using partial least squares structural equation modeling (PLS-SEM). Primary data are collected through a structured questionnaire completed by qualified investors. Evidence shows that reputation positively impacts ESG initiatives. Financial performance, on the other hand, has a positive relationship only with governance. Social and environmental initiatives are positively related to the intention to invest in ESG stocks, but the same is not true for the governance dimension. Finally, the moderating effects of risk aversion were not confirmed. This may indicate that ESG is an integrated set of actions, as expected, at least among qualified investors. That represents a theoretical contribution to the study of investor behavior.
Downloads
References
Ajzen, I. (1991). The theory of planned behavior. Organizational Behavior and Human Decision Processes, 50(2), 179-211. https://doi.org/10.1016/0749-5978(91)90020-T
Alda, M. (2021). The environmental, social, and governance (ESG) dimension of firms in which social responsible investment (SRI) and conventional pension funds invest: The mainstream SRI and the ESG inclusion. Journal of Cleaner Production, 298, 126812. https://doi.org/10.1016/j.jclepro.2021.126812
Aluchna, M., Roszkowska-Menkes, M., Kamiński, B., & Bosek-Rak, D. (2022). Do institutional investors encourage firm to social disclosure? The stakeholder salience perspective. Journal of Business Research, 142, 674-682. https://doi.org/10.1016/j.jbusres.2021.12.064
Alvarez-Perez, H., Diaz-Crespo, R., & Gutierrez-Fernandez, L. (2024). ESG investing versus the market: Returns and risk analysis and portfolio diversification in Latin America. Academia Revista Latinoamericana de Administración, 37(1), 78-100. https://doi.org/10.1108/ARLA-02-2023-0033
Arco-Castro, M. L., López-Pérez, M. V., Macías-Guillén, A., & Rodríguez-Ariza, L. (2023). The role of socially responsible investors in environmental performance. An analysis of proactive and reactive practices. Journal of Cleaner Production, 419, 138279. https://doi.org/10.1016/j.jclepro.2023.138279
Auger, P., & Devinney, T. M. (2007). Do what consumers say matter? The misalignment of preferences with unconstrained ethical intentions. Journal of Business Ethics, 76(4), 361–383. https://dx.doi.org/10.2139/ssrn.901861
Bido, D. S., & Da Silva, D. (2019). SmartPLS 3: especificação, estimação, avaliação e relato. Administração: Ensino e Pesquisa, 20(2), 488-536. https://doi.org/10.13058/raep.2019.v20n2.1545
Bock, G. W., Zmud, R. W., Kim, Y. G., & Lee, J. N. (2005). Behavioral intention formation in knowledge sharing: Examining the roles of extrinsic motivators, social-psychological forces, and organizational climate. MIS Quarterly, 29(1), 87-111. https://doi.org/10.2307/25148669
Bofinger, Y., Heyden, K. J., & Rock, B. (2022). Corporate social responsibility and market efficiency: Evidence from ESG and misevaluation measures. Journal of Banking & Finance, 134, 106322. https://doi.org/10.1016/j.jbankfin.2021.106322
Broadstock, D. C., Chan, K., Cheng, L. T., & Wang, X. (2021). The role of ESG performance during times of financial crisis: Evidence from COVID-19 in China. Finance Research Letters, 38, 101716. https://doi.org/10.1016/j.frl.2020.101716
Chairani, C., & Siregar, S. V. (2021). The effect of enterprise risk management on financial performance and firm value: the role of environmental, social and governance performance. Meditari Accountancy Research, 29(3), 647-670. https://doi.org/10.1108/MEDAR-09-2019-0549
Comissão de Valores Mobiliários [CVM] (2021). Resolução CVM 30/2021. Dispõe sobre o dever de verificação da adequação dos produtos, serviços e operações ao perfil do cliente e revoga a Instrução CVM nº 539, de 13 de novembro de 2013. https://conteudo.cvm.gov.br/export/sites/cvm/legislacao/resolucoes/anexos/001/resol030consolid.pdf
Comissão de Valores Mobiliários [CVM]. (2023). Resolução CVM 193/2023. Dispõe sobre a elaboração e divulgação do relatório de informações financeiras relacionadas à sustentabilidade, com base no padrão internacional emitido pelo International Sustainability Standards Board - ISSB. https://conteudo.cvm.gov.br/legislacao/resolucoes/resol193.html
Cornell, B. (2021). ESG preferences, risk and return. European Financial Management, 27(1), 12-19. https://doi.org/10.1111/eufm.12295
Drempetic, S., Klein, C., & Zwergel, B. (2020). The influence of firm size on the ESG score: Corporate sustainability ratings under review. Journal of Business Ethics, 167(2), 333-360. https://doi.org/10.1007/s10551-019-04164-1
Egorova, A. A., Grishunin, S. V., & Karminsky, A. M. (2022). The Impact of ESG factors on the performance of Information Technology Companies. Procedia Computer Science, 199, 339-345. https://doi.org/10.1016/j.procs.2022.01.041
Faul, F., Erdfelder, E., Buchner, A., & Lang, A. G. (2009). Statistical power analyses using G*Power 3.1: Tests for correlation and regression analyses. Behavior Research Methods, 41(4), 1149-1160. https://doi.org/10.3758/brm.41.4.1149
Garg, A., Goel, P., Sharma, A., & Rana, N. P. (2022). As you sow, so shall you reap: Assessing drivers of socially responsible investment attitude and intention. Technological Forecasting and Social Change, 184, 122030. https://doi.org/10.1016/j.techfore.2022.122030
Gillan, S. L., Koch, A., & Starks, L. T. (2021). Firms and social responsibility: A review of ESG and CSR research in corporate finance. Journal of Corporate Finance, 66, 101889. https://doi.org/10.1016/j.jcorpfin.2021.101889
Goles, T., Jayatilaka, B., George, B., Parsons, L., Chambers, V., Taylor, D., & Brune, R. (2008). Softlifting: Exploring determinants of attitude. Journal of Business Ethics, 77, 481-499. https://doi.org/10.1007/s10551-007-9361-0
Hair, J. F., Hult, G. T. M., Ringle, C. M., & Sarstedt, M. (2022). A primer on partial least squares structural equation modeling (PLS-SEM) (3ª ed.). Thousand Oaks, CA: SAGE Publications.
Hair, J. F., Risher, J. J., Sarstedt, M., & Ringle, C. M. (2019). When to use and how to report the results of PLS-SEM. European Business Review, 31(1), 2-24. https://doi.org/10.1108/EBR-11-2018-0203
Horn, M. (2024). The European green deal, retail investors and sustainable investments: A perspective article covering economic, behavioral, and regulatory insights. Current Research in Environmental Sustainability, 7, 100241. https://doi.org/10.1016/j.crsust.2024.100241
Huang, D. Z. X. (2022). Environmental, social and governance factors and assessing firm value: Valuation, signaling and stakeholder perspectives. Accounting & Finance, 62, 1983-2010. https://doi.org/10.1111/acfi.12849
Jonwall, R., Gupta, S., & Pahuja, S. (2022). Socially responsible investment behavior: A study of individual investors from India. Review of Behavioral Finance, 15(6), 865-888. https://doi.org/10.1108/RBF-05-2021-0099
Kahneman D., &Tversky A. (1979). Prospect theory: An analysis of decision under risk. Econometrica, 47(2), 263–291. https://courses.washington.edu/pbafhall/514/514%20Readings/ProspectTheory.pdf
Kleffel, P., & Muck, M. (2023). Aggregate confusion or inner conflict? An experimental analysis of investors’ reaction to greenwashing. Finance Research Letters, 53, 103421. https://doi.org/10.1016/j.frl.2022.103421
Kim, S., & Li, Z. (2021). Understanding the impact of ESG practices in corporate finance. Sustainability, 13(7), 3746. https://doi.org/10.3390/su13073746
Koenig-Lewis, N., Palmer, A., Dermody, J., & Urbye, A. (2014). Consumers’ evaluations of ecological packaging–Rational and emotional approaches. Journal of Environmental Psychology, 37, 94-105. https://doi.org/10.1016/j.jenvp.2013.11.009
Krumpal, I. (2013). Determinants of social desirability bias in sensitive surveys: A literature review. Quality & Quantity, 47(4), 2025–2047. https://doi.org/10.1007/s11135-011-9640-9
La Torre, M., Mango, F., Cafaro, A., & Leo, S. (2020). Does the ESG index affect stock return? Evidence from the Eurostoxx50. Sustainability, 12(16), 6387. https://doi.org/10.3390/su12166387
Landi, G. C., Turriziani, L., Muto, V., & Ricciardi, I. (2024). Exploring the nexus between ESG risk variations and investment preferences: Insights from sustainable ETFs during the COVID-19 era. Socio-Economic Planning Sciences, 95, 102039. https://doi.org/10.1016/j.seps.2024.102039
Lange, D., Lee, P. M., & Dai, Y. (2011). Organizational reputation: A review. Journal of Management, 37(1), 153-184. https://doi.org/10.1177/0149206310390963
Li, T., Shu, X., & Liao, G. (2024). Does corporate greenwashing affect investors’ decisions? Finance Research Letters, 67, 105877. https://doi.org/10.1016/j.frl.2024.105877
Liu, M., Guo, T., Ping, W., & Luo, L. (2023). Sustainability and stability: will ESG investment reduce the return and volatility spillover effects across the Chinese financial market? Energy Economics, 121, 106674. https://doi.org/10.1016/j.eneco.2023.106674
Macedo, P. S., Rocha, P. S., Rocha, E. T., Tavares, G. F., & Jucá, M. N. (2022). O impacto do ESG no valor e custo de capital das empresas. Contabilidade Gestão e Governança, 25(2), 159-175. https://doi.org/10.51341/cgg.v25i2.2802
Maiti, M. (2021). Is ESG the succeeding risk factor? Journal of Sustainable Finance & Investment, 11(3), 199-213. https://doi.org/10.1080/20430795.2020.1723380
Metzger, B. A., & Fehr, R. R. (2018). Measuring financial risk attitude: How to apply both regulatory and scientific criteria to ensure suitability. Journal of Behavioral Finance, 19(2), 221-234. http://doi.org/10.1080/15427560.2017.1376331
Nederhof, A. J. (1985). Methods of coping with social desirability bias: A review. European Journal of Social Psychology, 15(3), 263-280. https://doi.org/10.1002/ejsp.2420150303
Naderifar, M., Goli, H., & Ghaljaie, F. (2017). Snowball sampling: A purposeful method of sampling in qualitative research. Strides in Development of Medical Education, 14(3). https://doi.org/10.5812/SDME.67670
Paulhus, D. L. (1984). Two-component models of socially desirable responding. Journal of Personality and Social Psychology, 46(3), 598–609. https://doi.org/10.1037/0022-3514.46.3.598
Palma-Ruiz, J. M., Castillo-Apraiz, J., & Gómez-Martínez, R. (2020). Socially responsible investing as a competitive strategy for trading companies in times of upheaval amid COVID-19: Evidence from Spain. International Journal of Financial Studies, 8(3), 41. https://doi.org/10.3390/ijfs8030041
Pedersen, L. H., Fitzgibbons, S., & Pomorski, L. (2021). Responsible investing: The ESG-efficient frontier. Journal of Financial Economics, 142(2), 572-597. https://doi.org/10.1016/j.jfineco.2020.11.001
Pokou, F., Sadefo Kamdem, J., & Benhmad, F. (2024). Empirical performance of an ESG assets portfolio from US market. Computational Economics, 64(3), 1569-1638. https://doi.org/10.1007/s10614-023-10491-3
Puriwat, W., & Tripopsakul, S. (2022). From ESG to DESG: The impact of DESG (Digital Environmental, Social, and Governance) on customer attitudes and brand equity. Sustainability, 14(17), 10480. https://doi.org/10.3390/su141710480
Raghunandan, A., & Rajgopal, S. (2022). Do ESG funds make stakeholder-friendly investments? Review of Accounting Studies, 27(3), 822-863. https://doi.org/10.1007/s11142-022-09693-1
Rau, P. R., & Yu, T. (2024). A survey on ESG: investors, institutions and firms. China Finance Review International, 14(1), 3-33. https://doi.org/10.1108/CFRI-12-2022-0260
Raut, R. K., Kumar, R., & Das, N. (2021). Individual investors’ intention towards SRI in India: an implementation of the theory of reasoned action. Social Responsibility Journal, 17(7), 877-896. https://doi.org/10.1108/SRJ-02-2018-0052
Raut, R. K., Shastri, N., Mishra, A. K., & Tiwari, A. K. (2023). Investor’s values and investment decision towards ESG stocks. Review of Accounting and Finance, 22(4), 449-465. https://doi.org/10.1108/raf-12-2022-0353
Reber, B., Gold, A., & Gold, S. (2022). ESG disclosure and idiosyncratic risk in initial public offerings. Journal of Business Ethics, 179(3), 867-886. https://doi.org/10.1007/s10551-021-04847-8
Ringle, C. M., Sarstedt, M., Sinkovics, N., & Sinkovics, R. R. (2023). A perspective on using partial least squares structural equation modelling in data articles. Data in Brief, 48, 109074. https://doi.org/10.1016/j.dib.2023.109074
Sabbaghi, O. (2022). The impact of news on the volatility of ESG firms. Global Finance Journal, 51, 100570. https://doi.org/10.1016/j.gfj.2020.100570
Sahi, S. K. (2017). Psychological biases of individual investors and financial satisfaction. Journal of Consumer Behaviour, 16(6), 511-535. https://doi.org/10.1002/cb.1644
Santos, M. C., & Pereira, F. H. (2022). ESG performance scoring method to support responsible investments in port operations. Case Studies on Transport Policy, 10(1), 664-673. https://doi.org/10.1016/j.cstp.2022.01.027
Sarstedt, M., Hair, J. F., Pick, M., Liengaard, B. D., Radomir, L., & Ringle, C. M. (2022). Progress in partial least squares structural equation modeling use in marketing research in the last decade. Psychology & Marketing, 39(5), 1035-1064. https://doi.org/10.1002/mar.21640
Sciarelli, M., Cosimato, S., Landi, G., & Iandolo, F. (2021). Socially responsible investment strategies for the transition towards sustainable development: The importance of integrating and communicating ESG. The TQM Journal, 33(7), 39-56. https://doi.org/10.1108/TQM-08-2020-0180
Sharma, P. N., Liengaard, B. D., Hair, J. F., Sarstedt, M., & Ringle, C. M. (2023). Predictive model assessment and selection in composite-based modeling using PLS-SEM: extensions and guidelines for using CVPAT. European Journal of Marketing, 57(6), 1662-1677. https://doi.org/10.1108/EJM-08-2020-0636
Sood, K., Pathak, P., & Gupta, S. (2024). How do the determinants of investment decisions get prioritized? Peeking into the minds of investors. Kybernetes, 54(3), 2175-2203. https://doi.org/10.1108/K-04-2023-0662
Thanki, H., Shah, S., Rathod, H. S., Oza, A. D., & Burduhos-Nergis, D. D. (2022). I am ready to invest in socially responsible investments (SRI) options only if the returns are not compromised: individual investors’ intentions toward SRI. Sustainability, 14(18), 11377. https://doi.org/10.3390/su141811377
Todaro, D. L., & Torelli, R. (2024). From greenwashing to ESG-washing: a focus on the circular economy field. Corporate Social Responsibility Environment Management, 31, 4030-4046. https://doi.org/10.1002/csr.2786
Tourangeau, R., & Yan, T. (2007). Sensitive questions in surveys. Psychological Bulletin, 133(5), 859-883. https://doi.org/10.1037/0033-2909.133.5.859
Wong, W. C., Batten, J. A., Mohamed-Arshad, S. B., Nordin, S., & Adzis, A. A. (2021). Does ESG certification add firm value? Finance Research Letters, 39, 101593. https://doi.org/10.1016/j.frl.2020.101593
Xie, E., & Cao, S. (2023). Can network attention effectively stimulate corporate ESG practices? Evidence from China. Plos One, 18(12), e0290993. https://doi.org/10.1371/journal.pone.0290993
Zhang, X., Ma, L., & Zhang, M. (2024). Investor perception of ESG performance: Examining investment intentions in the Chinese stock market with social self-efficacy moderation. Journal of Risk and Financial Management, 17(4), 166. https://doi.org/10.3390/jrfm17040166
Zhou, D., & Zhou, R. (2021). ESG performance and stock price volatility in public health crisis: Evidence from COVID-19 pandemic. International Journal of Environmental Research and Public Health, 19(1), 202. https://doi.org/10.3390/ijerph19010202
Zumente, I., & Bistrova, J. (2021). ESG importance for long-term shareholder value creation: Literature vs. practice. Journal of Open Innovation: Technology, Market, and Complexity, 7(2), 127. https://doi.org/10.3390/joitmc7020127
Downloads
Published
Issue
Section
License
This work is licensed under a Creative Commons Attribution 4.0 International License.
The content of the article(s) published in the RC&F are of the entire liability of the authors, including with regard to the truth, updating and accuracy of data and information. The authors shall assign the rights in advance to the Department of Accounts and Actuarial Sciences of the FEA/USP, which shall permit the publication of extracts or of the whole, with prior permission, provided that the source is cited (Creative Commons – CCBY).
RC&F shall not charge a fee for the submission of articles. The submission of articles to RC&F shall imply that the author(s) authorizes/authorize its publication without the payment of author’s rights.
The submission of articles shall authorize the RC&F to adjust the text of the article(s) to their publication formats and if necessary, to make spelling, grammar and regulatory changes.
