Impact of ESG (Environmental, Social, Governance) Practices on Investor Decision-Making

Abstract

This study examined practice of Environmental, Social, and Governance (ESG) and its effects in influencing the investing decisions in stock markets of Pakistan. It was a quantitative study, in which the sample consisted of 280 individual and institutional investors. They were selected through purposive sampling in order to target investors with sufficient knowledge and relevant experience. The information was captured through the use of administered questionnaires and the use of SPSS (version 25) in carrying out descriptive, correlation, regression, and ANOVA analysis. The participants were predominantly well educated, in their youths and middle ages, and had experience in financial decision making, which deemed their opinions relevant to the ESG practices. Correlation analysis confirmed that the ESG disclosures and investors decisions on the contrary to regression analysis which stated that disclosing information have a positive significant impact on the investor's trust. Also, the ANOVA results showed that the practiced ESG risk management had a significant impact on the investment attitude suggesting that the investors care about the companies that properly handle sustainability risks. These results indicate that investors in Pakistan are increasingly considering ESG elements in their investment decisions which shows a move toward more sustainable and responsible investing. This research contributes to the literature by establishing a connection between ESG factors and the investors’ actions. It also has implications for practitioners in that businesses ought to enhance disclosure and risk management practices to be able to gain investment.