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Sustainable development investment decision: do environmental, social & governance (ESG) and behavioural biases factors matter?

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Bihari, Anshita, Dash, Manoranjan, Muduli, Kamalakanta, Kumar, Anil, Luthra, Sunil and Upadhyay, Arvind (2025) Sustainable development investment decision: do environmental, social & governance (ESG) and behavioural biases factors matter? Sustainable Development. ISSN 1099-1719 (In Press)

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Abstract

This paper investigates the critical factors involved and evaluates how ESG along with behavioural biases impact the sustainable investment decision making. The researchers employed the purposive sampling with random sampling method to gather data from retail investors; the data is then analysed in two stages. The first stage involves using PLS-SEM for identifying the significant factors influencing investment decisions. The second stage uses the results of SEM as input into ANN model with the fusion of ANN with SEM in explaining the high predictability of investment decision factors among investors. Using a multilayer perception model, the ANN explains the predictability of the predictors of investment decisions. It reveals the normalized importance values for the significant predictors - confirmation bias, endowment effect, hindsight bias, bandwagon effect, and ESG. By examining the biases from behavioural finance perspective significant academic contribution is made in context of retail investors along with ESG as critical determinants influencing investment decisions. The study results enable investment firms to predict the extent to which their investment avenue programs impact investment decisions before developing these programs with appropriate ESG measures, thus enabling a sustainable investment ecosystem. The research contributes uniquely to the existing behavioural finance area by developing a framework to understand ESG dynamics and biases which collectively impacting on investment decisions.

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