Responsible Investment Research Articles

Does Self-Control and Over-Confidence Influence Investment Decision: The Mediating Role of Fundamental and Technical Analysis

This study investigates the influence of self-control and over-confidence on investment decision-making, with a focus on the mediating role of fundamental and technical analysis. The respondents of the study are institutional investors operating in the Pakistan Stock Exchange Market (PSX), which includes the Lahore Stock Exchange, Karachi Stock Exchange, and Islamabad Stock Exchange. The behavior of these investors is assessed to determine the impact of stock market fluctuations on their investing decisions. The unit of analysis in this research is the institutional investors themselves. The study aims to examine the behavioral consequences of integrating self-control and overconfidence variables in investment decisions, particularly in relation to market instability and variations in fundamental and technical analysis. To select the sample, both stratified sampling and cluster sampling techniques were employed. Cluster sampling was used to save costs, while stratified sampling ensured that the sample accurately reflects the population. The states were divided into clusters to facilitate the use of cluster sampling. In terms of sample size, the study solely focuses on institutional investors in the Pakistan stock exchange PSX. Therefore, the sample consists of 375 institutional investors. Data collection for this study utilized a 5-point Likert scale, which is a commonly used measurement instrument for determining the relationship between variables. The scale allows respondents to provide their opinions on a continuum from strongly disagree to strongly agree. This approach enhances the originality and reliability of the data while minimizing respondent annoyance. Overall, this study aims to contribute to the understanding of how self-control and over-confidence influence investment decisions, with fundamental and technical analysis serving as mediators in the context of the Pakistan Stock Exchange Market. The findings from this research can provide valuable insights for institutional investors in their decision-making processes. Integrating self-control and over-confidence in investment decision-making aligns with SDG Goal 8: Decent Work and Economic Growth, by promoting responsible and sustainable investment practices.

A Theory of Socially Responsible Investment

Abstract We characterize the conditions under which a socially responsible (SR) fund induces firms to reduce externalities, even when profit-seeking capital is in perfectly elastic supply. Such impact requires that the SR fund’s mandate permits the fund to trade off financial performance against reductions in social costs—relative to the counterfactual in which the fund does not invest in a given firm. Based on such an impact mandate, we derive the social profitability index, an investment criterion that characterizes the optimal ranking of impact investments when SR capital is scarce. If firms face binding financial constraints, the optimal way to achieve impact is by enabling a scale increase for clean production. In this case, SR and profit-seeking capital are complementary: Surplus is higher when both investor types are present.

Responsible investment: Institutional shareholders and ESG performance

This study examines the impact of institutional investors on firms' environmental, social, and governance (ESG) performance and the possible channels through which this impact occurs. Using a large, balanced set of panel data from 3881 companies in China from 2009 to 2021, we uncover the following significant associations. (i) A positive relationship exists between institutional investors and ESG performance, which holds after considering potential endogeneity problems and conducting a series of robustness tests. (ii) Specifically, institutional investors affect firms' ESG performance by enhancing their ESG strengths, improving their ESG weaknesses, and encouraging them to be more green. (iii) Institutional investors also influence firms' ESG performance positively through voicing and exit threats, although they may have a negative influence in the presence of collusion; however, we find no support for the soft activism mechanism by site visiting. (iv) The positive effect of institutional investors on ESG performance is more pronounced for stable and independent institutional investors, firms whose industries are not heavy polluters, and firms with worse corporate governance than for their counterparts. (v) Finally, financial returns motivate institutional investors to improve firms' ESG performance.

Impact on the performance of esg indices: a comparative study in Brazil and international markets

ABSTRACT The frequent use of Socially Responsible Investment (SRI) indices by market in developed countries has motivated the investigation of the performance of portfolios using SRI indices in Brazil, where no research has been identified comparing relative performance of portfolios composed of companies with and without properly documented Environment, Social and Governance (ESG) practices. In this work we compared the performance of ESG and traditional indices for Brazil and for some reference markets in the United States, Europe and Asia through a panel data analysis for a period from May 2014 to June 2021. The results indicated that there was no significant difference in performance between the traditional and ESG indices for all the markets analysed. In addition, in order to identify the factors that could influence the performance of the ESG index portfolio in Brazil, we control for companies’ ESG practice scores, leverage, size and sector of activities in both additive and interactive models. It was found that the performance of the ESG index was positively influenced by the size and leverage of these companies. The study also shows that the industry of basic materials have a significantly effect on the ESG index.

Investment modeling between energy futures and responsible investment

This research examines the hedging and diversification ability of energy futures (crude oil, heating oil, natural gas, gasoline, carbon) concerning investment in four different segments of responsible investment. Wavelet coherence and DCC-GARCH are used to inspect the association and volatility transmission between them. Conditional correlation, optimum portfolio weights and hedge ratios are also calculated for real-time data and decomposed series to analyze the optimum portfolio structure. Our analysis reveals that energy futures are more efficient as a hedge to responsible investment during the short-run period. Natural gas is the perfect hedge against all the segments of responsible investment. Each segment of energy futures can hedge investments in sustainability stocks and green bonds. Carbon and Gasoline are not the perfect hedge for ESGL and GCEI but can be used as a cheap hedge. Our study will help responsible investors to hedge their portfolio risk using related assets, countering their familiarity bias.

A Study of the Relationship Between ESG Performance and Firm Valuation

This study aims to explore the impact of environmental, social, and governance (ESG) factors on company valuation, providing in-depth analysis from multiple perspectives, including investor expectations, risk management, long-term strategy and brand building, and cost-effectiveness. With the increasing importance of ESG factors in investment decisions, there is a growing demand for sustainable and responsible investments, and strong ESG performance has been shown to have a positive impact on valuation. Additionally, this study analyzes ESG risks and their potential effects on valuation, highlighting effective risk management strategies and explores how environmental sustainability can reduce regulatory risks. Furthermore, the study delves into the relationship between ESG factors and long-term strategy, brand reputation, and cost-effectiveness, supported by empirical research and case studies. Finally, the study summarizes insights for companies and provides recommendations for strategically integrating ESG practices while also discussing future research directions in the field of ESG and valuation. The findings of this study are expected to provide valuable guidance for companies in formulating strategies in ESG practices, promoting sustainable value creation.

Quantum Computing Approach to Realistic ESG-Friendly Stock Portfolios

Finding an optimal balance between risk and returns in investment portfolios is a central challenge in quantitative finance, often addressed through Markowitz portfolio theory (MPT). While traditional portfolio optimization is carried out in a continuous fashion, as if stocks could be bought in fractional increments, practical implementations often resort to approximations, as fractional stocks are typically not tradeable. While these approximations are effective for large investment budgets, they deteriorate as budgets decrease. To alleviate this issue, a discrete Markowitz portfolio theory (DMPT) with finite budgets and integer stock weights can be formulated, but results in a non-polynomial (NP)-hard problem. Recent progress in quantum processing units (QPUs), including quantum annealers, makes solving DMPT problems feasible. Our study explores portfolio optimization on quantum annealers, establishing a mapping between continuous and discrete Markowitz portfolio theories. We find that correctly normalized discrete portfolios converge to continuous solutions as budgets increase. Our DMPT implementation provides efficient frontier solutions, outperforming traditional rounding methods, even for moderate budgets. Responding to the demand for environmentally and socially responsible investments, we enhance our discrete portfolio optimization with ESG (environmental, social, governance) ratings for EURO STOXX 50 index stocks. We introduce a utility function incorporating ESG ratings to balance risk, return and ESG friendliness, and discuss implications for ESG-aware investors.

Strategic mapping of the environmental social governance landscape in finance – A bibliometric exploration through concepts and themes

AbstractA substantial surge in ESG research has triggered a wide dissemination of research across various domains, underscoring the need for an extensive appraisal of the complex ESG landscape. This paper is grounded on a sample of 441 documents retrieved from the Web of Science database, spanning from 2007 to 2023. A strategic mapping was performed to decipher the cumulative scientific knowledge by delving into the interrelations among various facets and identifying the field's basic, motor, niche, and emerging themes. We also explore the thematic evolution of ESG across distinct time frames, indicating ESG's inception, evolution, and diversification over the years. Our findings contribute to the ESG literature by categorizing it into seven clusters across the four quadrants. Results of the strategic mapping accentuate the obsolete, over‐researched and promising areas of ESG research. We find research on CSR, socially responsible investments and ESG‐firm performance themes as over‐researched areas calling for diversification. Promising research areas include the emerging association of ESG with portfolio construction, green innovations and investments, ESG controversies, information asymmetry, divergence, greenwashing, AI‐enabled universal rating mechanism, up‐grading and down‐grading of ESG scores and ESG‐linked compensations. Thematic evolution of ESG research underpins the culmination of its interplay with sustainability, emerging markets, board diversity, and green financing. Finally, the factorial analysis strengthens the reliability of the main findings, making it robust. This paper stands as the initial venture providing a comprehensive exploration of conceptual linkages, shifts, and advancements within the ESG literature through thematic mapping, offering an original contribution to the field.

How do product responsibility and corporate philanthropy affect firm value?

Satisfying the consumer and contributing to societal well-being have been globally acknowledged, and these developments consequently boost corporate image, attract investors, increase stock prices, enhance firm value, and enable industrial and other firms to contribute to national development. This paper examines how product responsibility and philanthropy affect the performance of industrial goods firms in Nigeria. A sample of 7 firms was selected from 24 listed firms after employing a judgmental sampling technique and using secondary data and a quantitative research method. Data validation and analysis were aided by econometric views statistical software, panel data regression, fixed and random effects estimators, stationarity test, cross-section dependence test, Durbin-Watson test, and Hausman test. The study revealed that investment in product responsibility, as evidenced by the rising stock turnover rate, is value-enhancing in Nigeria {B1 = 0.076807, P = 0.0171 or P < 0.05}, while philanthropic donation is value destroying {B1 = –0.369535, P = 0.5817 or P > 0.05}. It was concluded that consumers’ confidence in corporate institutions can enhance corporate value, while investment in philanthropy is not usually value-enhancing when done irresponsibly and non-strategically. The study, therefore, recommended that investment in product responsibility should be consolidated to sustain the rising stock turnover rate, while investment in philanthropy should be done strategically and responsibly to make it value-enhancing. AcknowledgmentThis research was based on Nnamdi Azikiwe University Ph.D. Dissertation funded by the Tertiary Education Trust Fund (Tetfund), Nigeria. University of Calabar in Nigeria is highly acknowledged for funding the PhD dissertation through its Tetfund platform.

Investor value orientation and environmental and social implications: a case of New Zealand agribusinesses

PurposeThis study aims to examine the value orientations of New Zealand agribusiness investors and how these orientations influence their reactions to the environmental and social implications of agribusinesses.Design/methodology/approachIn the context of the New Zealand agricultural sector, the views of investors as published in print and broadcast media between 2018 and 2022 are gathered. The study uses qualitative content analysis to analyse the data. The study is based on the value-belief-norm theory.FindingsThe study reveals that New Zealand agribusiness investors express concern about the environmental (biospheric) and social (altruistic) impacts of the agribusiness sector, prompting calls for greater transparency, climate adaptation and ethical investment options. Additionally, they actively support local businesses to benefit their communities and preserve cultural heritage. Despite these biospheric and altruistic tendencies, investors also prioritise financial and non-financial interests (egoistic). This highlights a nuanced perspective guiding their investment choices – a balance between self-interest and contributing to the greater good. This signals a shift towards socially and environmentally responsible investment practices driven by multifaceted values.Research limitations/implicationsThe findings of this study highlight the role of non-pecuniary motives, like values, in determining the relevance of environmental and social information.Practical implicationsThe study’s findings offer insight to agribusinesses on how investors’ value orientations shape their investment decisions. This understanding can guide businesses in framing a reporting strategy that enhances the likelihood of investors perceiving reporting as relevant and persuasive, thereby attracting more investments. In turn, this tailored reporting approach assists investors in making well-informed decisions in assessing the environmental and societal risks of agribusinesses.Originality/valueThe study offers a framework explaining how agribusinesses can increase the likelihood of investors finding firms reporting relevant and persuasive, leading to increased investments in environmentally and socially sustainable practices.

Towards a sustainable future: a comprehensive review of Green Sukuk

PurposeGreen sukuk (GS) is an emerging financial tool that has gained momentum in recent years owing to increased attention being given to Islamic finance, socially responsible investing (SRI) and sustainability agendas. Yet, GS studies are fragmented, dispersed and lack comprehensive reviews. As a response to this gap in academia, this paper aims to synthesize the knowledge on GS into thematic clusters, providing a more comprehensive understanding of the subject and offering guidelines for future research.Design/methodology/approachThis study implemented a systematic literature review approach to analyse studies on GS that were published prior to and including June 2023. The PRISMA 2020 protocol was used in the sample selection process. A total of 62 peer-reviewed journal articles from six databases were identified and categorized into various themes.FindingsThe results suggest that previous research has predominantly focused on the areas of GS advantages, drivers, market development and potential sectors, along with challenges and recommendations to improve the market. However, it was found that some other aspects, including GS pricing, performance and purchasing intention, require further research attention. The analysis also indicated that the use of theories in the GS context was limited, with only five theories employed in just four out of the 62 articles examined. Moreover, this paper’s findings revealed that the studies employing quantitative and empirical analysis methods were limited to four articles. Geographically, most of the studies were conducted in Indonesia and Malaysia, while other countries with high-potential markets (e.g. GCC) had limited GS practices and studies.Practical implicationsThe results of this study have several practical implications. For investors, a review of GS will provide greater insight into the understanding of the GS market, helping them make better investment decisions. For policymakers, this paper empowers them with the knowledge to make informed decisions regarding GS markets by highlighting key recommendations identified in the literature. Finally, the proposed guidelines can be used in future research.Originality/valueWhile Green Bonds have received significant attention, there is a dearth of research on GS and those that exist are fragmented. A systematic literature review is necessary to identify knowledge gaps for future research.

RESPONSIBLE BUSINESS PRACTICE BY INSTITUTIONAL INVESTORS AS THE BASIC MEANS OF PREVENTING VIOLATIONS OF PUBLIC INTEREST OF CITIZEN INVESTORS

The article is devoted to the analysis of the concept of "responsible business conduct" from the point of view of public interest. It is noted that responsible corporate governance has its origins in the concept of "corporate social responsibility", which became widespread in the 1970s in the US and the UK as a result of increased public and consumer attention to the overall image of companies. At the international level, many documents have been adopted to regulate corporate social responsibility. However, not enough has been done in Ukraine to introduce this category into economic activity. The purpose of the research is to analyse the legal grounds and theoretical approaches to the formation of the concept of "responsible business conduct" and to present the author's approach to the essence of the concept of "responsible business conduct of institutional investors" from the point of view of the protection of the public interest. According to the purpose of the article, several scientific methods of modern epistemology were used in the scientific research. The methodological basis of the study was the theory of legal cognition developed by prominent experts in the field of investment law. In addition, special research methods were used, in particular: comparative – to compare the rules of international and national law; historical and legal – for retrospective analysis of the concept of social responsibility; special legal – for in-depth analysis of the regulations governing the procedure of investment; systematic approach and logical-legal method – to analyse the impact of some factors on the investment activity of individuals and some elements of the formation of logical and specific theoretical and applied conclusions. In conclusion, the authors define responsible business as a set of generally accepted norms, rules and principles that are voluntarily implemented by companies in order to achieve the goals of sustainable development of society; they are not part of the national legislation of Ukraine, but their observance indicates a certain business reputation of the business entity. For institutional investors, responsible corporate governance includes two main groups of activities of an institutional investor: "responsible attraction" of funds and "responsible investment" of funds of individual investors. The authors proposed to divide the responsible business conduct of an institutional investor to manifest its social responsibility into "responsible attraction" of funds and "responsible investment" of funds.

Analyzing Trends in Green Financial Instrument Issuance for Climate Finance in Capital Markets

Numerous stakeholders concur that tackling the climate change effect requires massive financial mobilization from the public and private sectors to reduce the climate financing gap. Capital markets are among the key players fostering this mobilization by issuing green financial instruments and facilitating capital flows to green investments. The study aimed to conduct a bibliometric analysis to fill a knowledge gap by evaluating the status and linkages in the literature on capital markets’ green financial instrument issuances. We utilized the Bibliometrix R package and VOS viewer to analyze 314 relevant publications from the Web of Science in 2017–2023 following the Sustainable Stock Exchanges’ green finance voluntary action plan. The analysis entailed mapping the scientific production trends, journal significance, author productivity, keyword linkages, emerging and trending topics, and collaborations within social structures. Further, the study assessed the applicability of Bradford’s, Zipf’s, and Lotka’s bibliometric laws. We highlight six conclusions based on the analysis, their relevance to various stakeholders, and future research directions. The findings are essential in enhancing the decision-making process of policymakers, corporations, responsible investors, and researchers interested in understanding the effectiveness and impact of green financial instruments.

In search of socially responsible investors: a Latent Profile Analysis

IntroductionSocially responsible investments (SRI) increased their popularity among investors over the last two decades. However, there is still a lack of knowledge on socially responsible investors' characteristics and motivations behind the decision to invest in SRI. The present paper aims at filling this gap by profiling current and potential sustainable investors.MethodCross-sectional data from a representative sample of Italian consumers (N = 1,002) was used to perform a Latent Profile Analysis (LPA), a clustering technique, and identify various sub-groups within the respondents. Subsequently, chi-square test and one-way ANOVA were performed to determine which profile(s) was mostly associated with current and potential socially responsible investing.Results and discussionFive profiles of consumers were identified through the LPA, each one differently associated with the likelihood of investing in socially responsible products. The profile that best describes sustainable investors is characterized by high levels of knowledge toward SRI, risk appetite, positive attitudes on SRI, personal norms, perceived behavioral control, environmental concerns, and connectedness to nature. These findings suggest that non-financial aspects, namely psychological characteristics such as attitudes and personal values, play a key role in the decision to invest responsibly as well.

Globalization: Embracing global citizenship and the right to migrate.

This comprehensive commentary explores various facets of globalization, including the right to migrate, cultural dimensions, power dynamics in shaping global narratives, the impact of globalization on health, and the roles of international institutions and multinational corporations. It delves into the socioeconomic implications of migration, emphasizing the ethical considerations surrounding globalization and the responsibilities of affluent nations. Examples such as the Fair Trade movement, global collaboration in health care during the coronavirus disease 2019 (COVID-19) pandemic, and the influence of power dynamics on cultural narratives provide a nuanced understanding. The commentary underscores the need for international collaboration, ethical business practices, and responsible investment to address global challenges. By examining these dimensions, the analysis contributes to a holistic understanding of the complexities associated with globalization, emphasizing the importance of balanced and inclusive approaches. This commentary is in response to an editorial published in this journal titled "Globalization through global citizenship and right to migrate."

Impact of Corporate Sustainability Performance on Financial Performance of South African Industries Via Brand Value and Competitiveness

Sustainability managers and stakeholders unanimously recognise that a single, systematic and integrated model for measuring corporate sustainability performance significantly enhances firms’ competitive advantage, profit and performance. Nevertheless, serious concerns exist in literature on the non-existence of a single, systematic and integrated model for measuring the impact of corporate sustainability performance (i.e. environmental, social, and economic) on the financial performance of South African industries via brand value/reputation and competitiveness. Thus, the objective is to develop this model by collecting qualitative and quantitative data through a census of 70 out of 74 companies of Johannesburg Stock Exchange, active in Socially Responsible Investment Index. Factor analysis was used for data reduction, Chi-square tested for association between categorical variables, and Cronbach alpha for internal consistency and reliability of instruments. Findings revealed positive impacts between environmental, social and economic aspects of corporate sustainability performance, brand value/reputation, competitiveness and financial performance. Results also showed that the elements/factors of corporate social performance like ethical behaviour, genuine community initiatives and human rights can translate to brand value/reputation. Likewise, elements/factors of brand value/reputation like competitive edge, comparative advantage, innovation, reputation, employees’ loyalty and non-market effect can translate to competitiveness and financial performance. By implication, the model can be useful to potential managers in South Africa or world for making easy and prompt decisions on past, pending and future environmental, social and economic sustainability. Hence, the research contributes to development science a single, systematic and integrated evaluation model adaptable to companies, businesses and governments/municipalities for achieving performance targets.

Disentangling ESG: Environmental, social and governance ratings and financial performance of Polish listed companies

Socially responsible investments are a significant element of the global capital market and are becoming increasingly important also in the eyes of Polish investors. ESG ratings are a crucial decisive criterion, as they provide information on the corporate governance (G), and social (S) and environmental (E) activities, of companies. Even though the abovementioned areas differ significantly, the use of ESG ratings by investors is often narrowed down to the total ESG score. Additionally, the literature does not provide unambiguous results on whether the impact of total score as well as the individual pillars of E, S and G on the accounting-based financial performance of companies is statistically significant, and positive or negative. Sparse academic studies concentrate mainly on highly developed markets and accounting-based measures of profitability, leaving aside emerging markets, like Poland, and the other main characteristics of financial performance, like liquidity, efficiency, or leverage. The aim of this paper is therefore to fill the above gap by identifying the dependence of ratings in E, S and G areas and the accounting-based financial performance of companies listed on the Warsaw Stock Exchange. Selected financial parameters and company quotations were taken from the Notoria Serwis SA database, while data on ESG ratings from Refinitiv Eikon were used to perform correlation analysis. The analysis covers the years 2013–2022. The findings indicate a significant positive bi-directional impact of corporate governance (G) and efficiency, as well as of controversies score and efficiency. A linkage has also been revealed between controversies score and profitability. However, the hypothesis of an unequivocally positive impact of ESG factors on financial results, or conversely of financial results on ESG aspects, should be rejected.

A Study on Awareness of Cryptocurrency among College Students

Cryptocurrencies have emerged as a novel form of digital asset, sparking interest and debate globally. This study investigates the awareness of cryptocurrency among college students in Ernakulam district, India. It aims to assess the level of knowledge students possess regarding cryptocurrencies, including their understanding of concepts like blockchain technology. The research explores factors influencing student awareness, such as their exposure to financial literacy programs and media coverage. The study employs surveys or interviews (method to be specified) to gather data from a representative sample of college students. By analyzing the findings, the research seeks to identify areas of knowledge gaps and shed light on students' perceptions towards cryptocurrency investment. This exploration can contribute valuable insights for policymakers, educators, and financial institutions to develop targeted initiatives that enhance financial literacy and responsible investment practices among young adults in India's evolving financial landscape.

Energy Diplomacy in the Era of Energy Transition

The development of international relations after the 1973 oil crisis was accompanied by the emergence of such phenomena and concepts as global and regional energy security, energy security of states, foreign energy policy and energy diplomacy. Institutionalization and development of mechanisms ensuring energy security – including global energy security – occurred and continues to occur under the conditions of dominance of hydrocarbon fossil fuels in the world energy balance, as well as in the context of energy consumption worldwide. The priorities of its provision at the global, regional and state levels were and are the security of demand, supply and transit of hydrocarbon raw materials, and the diversification of energy sources. After signing the Paris Climate Agreement in 2015, efforts are being made to accelerate the low-carbon transformation of the world economy and the pace of the global energy transition. This involves mechanisms for responsible investment, carbon regulation, greenhouse gas emissions management (climate management); uses a variety of socially significant interpretations of ongoing climate change. These processes are increasingly determining the foreign energy policy of states, international energy diplomacy and influencing the previously formed mechanisms for ensuring energy security. The article is aimed at generalization and systematization of the ongoing changes in the activities of both traditional international centers and institutes of global energy policy, and relatively new international platforms in the subject area under consideration, primarily the Conferences of the Parties to the United Nations Framework Convention on Climate Change and their impact on energy policy and energy diplomacy.

Green Bonds: A Pathway to Sustainable Investment and Environmental Resilience

Green bonds (or climate bonds) are one of the most used sustainable investment instruments, and under the Paris Climate Agreement of 2015, the climate bond market is expected to thrive soon. Green bonds are gaining increasing popularity among environmentally responsible investors, as well as investors who “simply” attempt to benefit from portfolio diversification, including green issuances, that are close to other fixed bonds. This paper aims to take advantage of previous literature contributions on the green bond market to indicate the way forward for future research. Herein, through a systematic literature review on the green bond market, our goal is to provide investors, main markets actors, and policymakers with some helpful insight on the role of environmental investments in reshaping the financial markets and fostering the sustainability of the economy. Key words: Green bonds; systematic literature review; climate bond introduction, sustainable investment