Sustainable Finance and Traditional Investment Models: Analyzing Investors' Growing Focus on ESG Factors

Abstract

This study analyzes the growing influence of Environmental, Social, and Governance (ESG) considerations in reformulating investment strategies by institutional investors in Punjab - Pakistan. It used a quantitative research design and a sample size of 220 respondents. The modestly positive link between awareness of ESG and ESG integration (r = 0.346, p = 0.000) revealed by correlation analysis shows that high awareness generates more integration of ESG factors in investing strategies. Moreover, a low but considerable correlation was established between financial performance and ESG integration (r = 0.174, p = 0.010), where ESG factors may be able to help manage risk but not necessarily bring in profits in the short run. Nonetheless, the regression indicated that ESG-oriented investment performance does not determine overall financial performance and risk management (R² = 0.000, p = 0.876), pointing towards the difficulty of measuring ESG advantages in developing markets. This stresses the demand for uniform ESG models, enhanced investor vigilance, and long-term investments to drive the adoption of ESG. Future studies need to investigate industry-level ESG effects and long-term returns on finance to gain more meaningful insights into sustainable finance.