ESG or financial METRICS? What Retail Investors Really Look for in Decision-making

Title

ESG or financial METRICS? What Retail Investors Really Look for in Decision-making

Creator

Gopal, Suresh; Saravanakrishnan, V.; Elangovan, N.

Description

With the increasing global emphasis on responsible investing, this study explores the tradeoff between ESG and traditional financial metrics in shaping the investment decisions of retail investors in India. A within-subject experimental design was employed at Christ University, India, involving an initial sample of 75 participants, with 55 completing all three experiment rounds. The sample respondents evaluated masked stock profiles across three rounds, where updated financial and ESG information on masked stock was provided at each round. The results indicate that though ESG metrics are getting attention among retail investors, financial metrics are still the main determining factor for investment. It was found that ROE (52 responses), 3-year CAGR Net Profit (36 responses), and P/E ratios (48 responses) are the most influencing factors to make investment decisions. Similarly, ESG factors (Governance, Environmental, and Sustainability scores) are also frequently mentioned, with 74 citations. Retail investors mainly consider profitability and view ESG as risk-mitigating or neutralizing factors. While evaluating the ESG factors, retailers mainly look at the firms environmental concerns, followed by governance and social factors. This result contrasts with the previous studies in this domain, where the literature emphasized governance factors more than environmental factors. These results highlight the integration of ESG elements, as retail investors remain with favorable returns and sacrifice sustainability. Further, this study spots the need for better and quantifiable ESG performance reports to consider alternative data comparable to financial data for better investment decisions. Suresh Gopal, Saravanakrishnan V., Elangovan N., 2025.

Source

Investment Management and Financial Innovations;Volume;22;Issue;1;pp.351-368

Date

01-01-2025

Publisher

LLC CPC Business Perspectives

Subject

behavioral finance; ESG; financial metrics; investment decision; retail investors; sustainability

Coverage

Gopal S., Symbiosis Institute of Business Management, Symbiosis International (Deemed University, Bengaluru Campus, India; Saravanakrishnan V., CHRIST University, India; Elangovan N., Business Management Department, CHRIST University, India

Rights

All Open Access; Gold Open Access

Relation

ISSN: 18104967;

Format

online

Language

English

Type

Article

Identifier

https://doi.org/10.21511/imfi.22(1).2025.27

https://www.scopus.com/pages/publications/86000451281?origin=resultslist