Is Good Governance Essential for ESG Investments? An Individual Investor Perspective

This study explains how individual investors’ traits influence the ESG investing intention in the presence of good governance. This study integrated the Theory of Planned Behaviour framework and Value–Belief–Norm theory to examine how individual investors' traits, such as environmental concern, risk perception, and social investing efficacy, influence ESG investing intention, with the mediating effect of good governance. A cross-sectional sample of 672 individual investors was deliberately selected after a screening question, using purposive sampling from Kerala, a southern state in India. This study applied the PLS-SEM method and was analysed using SmartPLS 4 software. The results revealed that environmental concern and risk perception significantly influence ESG investing intention among individual investors. Good governance has a strong direct effect on the ESG investing intention of individual investors and partially mediates the connection between environmental concern, risk perception and ESG investing intention. Social investing efficacy does not directly influence ESG investing intention. However, the relationship becomes significant only with the presence of full mediation of good governance. Environmentally concerned investors are inclined towards ESG investment because of their personal values, which direct them to invest sustainably. Individual investors are risk-averse, and their risk perception towards ESG investment is minimal. Through good governance as a normative and credibility signal, perceived risk is minimised, and corporate behaviour is aligned with investors' sustainability values. An individual investor's social investing efficacy does not lead to ESG investments unless strongly supported by companies' good governance practices. Finally, good governance is essential in individual investors' ESG investment decisions.

ESG investing intention, Environmental concern, Good governance

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