Does ESG really matter? Accessing the relevance of ESG in Indian investors’ decision-making dynamics

Abstract

Purpose

Environmental, social and governance (ESG) is becoming an increasingly important non-financial parameter for measuring a company’s valuation. The purpose of this study is to assess the relevance of ESG in Indian investors’ decision-making dynamics.

Design/methodology/approach

This study used an exploratory qualitative research approach based on semi-structured in-depth interviews. A mixed method of purposeful and criterion sampling techniques was used to select 21 participants. Thematic content analysis was performed to analyze the data and understand the relevance of ESG in investors’ decision-making process.

Findings

This study finds that while Indian investors are aware of ESG factors, they prioritize traditional financial metrics like returns and risk over ESG considerations. ESG factors are often treated as secondary, hindered by the lack of standardization in data and ratings, making them difficult to quantify and compare. Additionally, concerns about greenwashing and unreliable ESG information further reduce their importance in investment decisions. The findings of this study highlight the need for reliable ESG data, standardization and increased investor education for better integration.

Research limitations/implications

This is an exploratory study with limited participants. Therefore, the results cannot be generalized to the Indian population. Different sampling criteria, a larger sample size or a quantitative research design approach may increase our understanding of the relevance of ESG.

Practical implications

This study provides insights into the awareness, relative importance and challenges of including ESG in investment decision-making. The results suggest further standardization and improving the awareness and trustworthiness of ESG reporting will help improve its relevance.

Originality/value

To the best of the authors’ knowledge, this study is one of its kind to investigate the awareness, perception and attitudes of Indian investors toward ESG. This study addresses an identified gap in the existing literature, explores the awareness level of ESG among Indian investors and suggests future research directions.

Citation

Banerjee, S. and David, R. (2024), "Does ESG really matter? Accessing the relevance of ESG in Indian investors’ decision-making dynamics", Qualitative Research in Financial Markets, Vol. ahead-of-print No. ahead-of-print. https://doi.org/10.1108/QRFM-10-2023-0241