INFLUENCE OF SCREENING CRITERIAON INCONSISTENT SRI PERFORMANCE AND THE IMPACT OF SOCIAL VALUES AND CORE TRAITS ON INVESTMENT CHOICES

Abstract

This thesis examines the rising significance of Socially Responsible Investing (SRI) in India, propelled by heightened global and domestic demand for sustainable and ethical investment practices. Although the concept of SRI is relatively novel in India, its foundational ideas of social responsibility and ethical stewardship are profoundly embedded in Indian culture. The Sustainable Development Goals (SDGs) and the emergence of Environmental, Social, and Governance (ESG) indexes, as well as domestic regulations like SEBI’s Business Responsibility and Sustainability Reporting (BRSR), have also contributed to the recent surge in SRI. These changes are motivating Indian investors to make financial decisions that are consistent with their social and environmental principles, indicating a significant shift towards sustainable finance in the country. This research aims to examine three critical domains where the literature on SRI is lacking. It seeks to investigate the factors influencing the mixed performance of socially responsible (SR) funds. Secondly, the study aims to examine the impact of Social Value Orientation (SVO) and emotional instability on the risk tolerance levels of Indian investors. Finally, it investigates the influence of core self-evaluation traits (CSE), SVO, risk tolerance, and demographic factors on investors’ decision-making process when selecting between SR and traditional funds. The convenience sampling technique is employed to collect data from Indian investors between April 2023 and April 2024 for the study. The SPSS 26 software is used to facilitate the analysis of the collected data using Binary and Multinomial logistic regression. The research findings indicate that there is heterogeneity among SR funds, which can be attributed to the differing levels of screening intensity of these funds. Moreover, variables such as the fund’s age and size, together with the methodology employed for risk assessment, influence the inconsistent performance of these funds. Furthermore, investors who emphasise prosocial orientation typically demonstrate greater risk tolerance and are more predisposed to invest in SR funds. On the other hand, emotional instability is negatively associated with risk tolerance, albeit without a significant impact on investment decisions. The study also reveals that investors’ preferences for SR funds are influenced by CSE traits, specifically lower neuroticism and higher self-esteem and self-efficacy. Additionally, the choice of SR funds is influenced by investors’ concerns regarding their ethical and social reputations. The research underscores the growing impact of sustainable finance trends on Indian investors, especially those who have low financial knowledge and who perceive SRI as an option to match their investments with personal and ethical principles. This research contributes to the field of behavioural finance by introducing SVO and CSE as novel psychological elements for understanding investment decisions. These new variables expand on prior models that primarily focused on the Theory of Planned Behaviour and the Big Five personality traits.