Assessing ESG Factors and Policies of Green Finance Investment Decisions for Sustainable Development in China Using the Fuzzy AHP and Fuzzy DEMATEL

Abstract

China has become more aware of the negative environmental impact caused by its economic expansion and fast-paced development. Therefore, the country mainly focuses on sustainable development and green finance. To evaluate the environmental, social, and governance (ESG) factors and policy options for green finance investment decisions in China, the fuzzy analytical hierarchy process (AHP) and fuzzy decision-making trial and evaluation laboratory (DEMATEL) techniques are employed. The fuzzy AHP method identifies and analyzes the most significant ESG factors and sub-sub-factors to comprehensively understand sustainable investment in China. Furthermore, this study uses the fuzzy DEMATEL method to prioritize the main policy options for advancing sustainable development and green finance investment decisions in China. The fuzzy AHP method shows that the environmental factor (ESG1) is the most significant factor for green finance investment decisions in China, followed by the governance (ESG3) and social factors (ESG2). The fuzzy DEMATEL method results revealed that supporting green finance innovation and development (P1) is the highest priority, followed by encouraging social responsibility and community engagement (P4) and developing and enforcing environmental regulations (P2). The study’s findings will significantly benefit investors and decision-makers who wish to promote sustainable development and make decisions regarding green financing. The study recommends that investors and policy makers concentrate their resources and efforts on the most crucial ESG factors and policies to build sustainability and resilience in the country.