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Kore University of Enna
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Prof. Dr. Gabriela Topa
Social and organizational Psychology, Universidad Nacional de Educacion a Distancia
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Home > Archives > Vol. 10 No. 11 (2025): published > Research Articles
ESP-3969

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2025-11-25

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Vol. 10 No. 11 (2025): published

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Research Articles

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Copyright (c) 2025 Saad Mahdi, Hussein Ali Abbas, Nahla Qasim Mohammed Ismail, Abdulrazzaq Tuama Hawas, Matai Nagi Saeed

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How to Cite

Saad Mahdi, Hussein Ali Abbas, Nahla Qasim Mohammed Ismail, Abdulrazzaq Tuama Hawas, & Matai Nagi Saeed. (2025). Sustainable Investment How Green Practices Influence Investor Decision-Making. Environment and Social Psychology, 10(11), ESP-3969. https://doi.org/10.59429/esp.v10i11.3969
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Sustainable Investment How Green Practices Influence Investor Decision-Making

Saad Mahdi

Al-Turath University, Baghdad 10013, Iraq

Hussein Ali Abbas

Al-Mansour University College, Baghdad 10067, Iraq

Nahla Qasim Mohammed Ismail

Al-Mamoon University College, Baghdad 10012, Iraq

Abdulrazzaq Tuama Hawas

Al-Rafidain University College, Baghdad 10064, Iraq

Matai Nagi Saeed

Madenat Alelem University College, Baghdad 10006, Iraq


DOI: https://doi.org/10.59429/esp.v10i11.3969


Keywords: Sustainable investment; ESG performance; financial stability; corporate valuation; investor sentiment; stock volatility; energy efficiency.


Abstract

Sustainable investment represents a major approach through which environmental, social, and governance (ESG) principles are integrated into financial decision-making. This study aims to examine how specific green practices—carbon reduction, waste minimization, and energy efficiency shape financial outcomes and investor behavior. The study investigates the correlation of ESG practices with corporate financial performance, specifically looking at primary metrics such as return on assets (ROA), stock volatility, cost efficiency, and valuation premiums. The study analyzes the association between ESG performance and financial outcomes based on sector-specific analysis using a panel regression model and subgroup comparison of those classi­fied as high, moderate, and low ESG performers.

 The findings indicate that firms with stronger ESG commitments exhibit higher profitability, lower financial risk, and higher confidence from shareholders. Energy efficiency improvements significantly reduce stock price volatility, thereby reinforcing the stability of sustainable firms. Additionally, waste-reduction strategies decrease operational costs, proving that sustainability initiatives improve operational efficiency. The research also shows that ESG transparency is a key factor in driving valuation premiums, with investors showing a preference for companies able to offer research-based and verifiable sustainability information. Sectoral differences are also evident, with companies in renewable energy and manufacturing gaining the most positive impact, according to the study.

The behavioral analysis reveals that institutional investors strongly value ESG transparency as a risk-mitigation tool, while retail investors balance sustainability concerns with short-term return expectations. The results confirm that sustainability practices function as measurable financial instruments rather than solely ethical commitments, strengthening long-term firm value and investor confidence.

Practically, the study suggests that robust ESG reporting enhances capital allocation efficiency and increases firms’ attractiveness to long-term, risk-averse investors. These findings demonstrate that sustainability strategies function not only as ethical choices but also as measurable financial instruments shaping investor behavior. The article addresses a critical gap highlighted in recent sustainability scholarship, which emphasizes the insufficient integration of investor psychology and ESG information processing in empirical models of investment decision-making.


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