Sustainable Finance, Ethical Investing, and Investors Behavior Toward Socially Responsible Companies

Sustainability is an issue that has been substantially reconstituting the process of investment decision-making in financial markets due to its increased integration in the financial markets. The research paper makes an impact on the behavioral intentions of investors to socially responsible firms assessing the effect of sustainable finance awareness, ethical investing orientation, perceived corporate social responsibility and perceptions of investor risks on investor behavioral intentions towards socially responsible firms. Quantitative cross-sectional research design was adopted in which data were sampled by means of a structured questionnaire on 350 individual and institutional investors. The relationship between the constructs was tested using structural equation modeling. The results indicate that the perceived corporate social responsibility is the highest predictor of the behavioral intention of the investors, which implies that the credible practices of the environmental, social and good governance have a great contribution on the investment attractiveness. The positive impact of ethical investment orientation is also significant, which proves that preference to values and moral considerations are the key factors in the contemporary process of portfolio allocation. The influence of sustainable finance awareness on ethical investment orientation and behavioral intention is positive, and knowledge and financial literacy is essential to encourage responsible investment activities. On the other hand, perception of risk by investors correlates with behavioral intention significantly negatively, which implies that the apparently perceived financial uncertainty could be a limiting factor in engaging in sustainable investments. The structural model describes a high percentage of variance in investor behavior and shows a high explanatory power. The research has an impact on the growing body of knowledge on sustainable finance by empirically supporting the behavioral forces that underlie responsible investment choices. The results highlight the role of transparency, standardized reporting on sustainability and education of investors as viable instruments to promote long-term sustainable development of capital markets.