The Impact of Green Finance Policies, ESG Investments and Investor Awareness on Environmental Performance of Sustainable Investments

Abstract

This paper aims to examine how green finance policies, ESG investments and investor awareness affect the environmental performance of sustainable investments. The research highlights the importance of these factors in supporting sustainable development and the alignment of investment practice with global environmental objectives. With the world moving towards more sustainable economies, it is crucial to comprehend the network effects of policy frameworks, ESG minded investments and investor behavior in achieving discernible environmental outcomes. Quantitative research design was used, employing a survey based methodology to gather data from 350 (in) institutional and individual investors currently engaged in sustainable investments. Data analysis was carried out using Structural Equation Modeling (SEM), which enabled the evaluation of a broad intersection of the relationships between the independent variables: green finance policies, ESG investments, and investor awareness, and the dependent variable: environmental performance of sustainable investments. Findings show that robust green finance policies substantially improve environmental performance, through incentives of green investments and compliance with environmental regulations. Direct and positive effects were found to exist between ESG investments and their potential to drive impactful environmental outcomes, when these investments are part of a broader investment strategy. Furthermore, the study finds that investor awareness mediates the effect of green finance policies and ESG investment on responsible investment behavior and investment decisions. These results carry profound implications for policymakers, for financial institutions, and for investors. Policymakers ought to center efforts on improving green finance frameworks, while financial institutions are motivated to increase the ESG investment offerings. Moreover, educating investors and making reporting more transparent are part and parcel of initiatives that are aimed at realizing the greatest environmental gain through sustainable investments.