Effect of esg factors on investment decision of investors in Nepal

Abstract

Environmental, social, and governance (ESG) factors have gradually become the main determinants in global investment decisions, and this research was conducted to evaluate their effect and especially on the behavior of the investors in Nepal. The major goal of this study was to find out the influence of environmental, social, and governance matters on the decision-making processes of investors in the given country. The researchers employed a descriptive and causal-comparative approach to investigate the investors' attitudes and behaviors towards the ESG factors. The census was taken from the 2,996,341 people that live in Kathmandu Valley, and then 400 people were selected to be part of the study by Yamane's formula, with a 5% error margin. Convenience sampling was the method of choice for data collection; primary data, via a structured questionnaire distributed to the sample and measured on the five points of the Likert scale, were the only ones used. After the collection of data, analysis was done through the application of statistical tools like Microsoft Excel and SPSS which included descriptive statistics, correlation analysis, and multivariate regression. The research adopted the ESG factors as independent variables and investment decisions as dependent variables in the research framework to judge the impact of the ESG elements on the investor's preferences. The research outcomes showed that factors related to the environmental, social, and governance had a positive and substantial influence on investment decison in Nepal. Among the three, governance had the highest impact, then came social and environmental factors, which imply that good ESG practices stimulate the Nepalese investors' making of investment decisions that are more responsible and less reactive.This study gives practical directions to investors, regulators, and companies in the future by pointing out the necessity of the integration of ESG factors into the investment strategies. It strongly suggests raising awareness and acceptance of the ESG practices as a means to bring about sustainable investment in Nepal. In the theoretical sense, it also helps to comprehend how ESG considerations are intertwined with investment behavior.