Responsible Investment and Its Impact on Investment Decisions: Zimbabwe Scenario

Abstract

Following calls by social, environmental, and corporate governance advocacy groups on the need for investors to take environmental, social, and governance (ESG) factors into consideration when making investment decisions, this research looks at responsible investment and its impact on investor decision-making. Using a Likert scale structured questionnaire, data are gathered on the key factors considered when making investment decisions and on the extent to which the inclusion of ESG variables may influence investment decisions. Using a Statistical Package for the Social Sciences (SPSS) correlation analysis, together with linear and ordinal regression analysis, the findings reveal that there is no significant relationship between ESG factors and investment decisions. It is therefore recommended that third parties—private institutions such as nongovernmental organizations—should intervene through policy recommendations, awareness campaigns, and advocacy to ensure that individual investors and entities do consider ESG factors in their investment decision-making and processes. It is also recommended that firms should disclose the extent to which they factor ESG issues into their investment decision-making. <b>TOPICS:</b>Portfolio theory, portfolio construction, ESG investing <b>Key Findings</b> • In Zimbabwe, ESG factors have no significant influence on the investor’s decision to invest. • The currently prevailing statutory frameworks, in Zimbabwe, do not suffice to make an investment responsible. • Private institutions, policymakers, and investors should work together to shape the investment framework and close the significant gap between investor interests and knowledge about responsible investment.