The Effect of Environmental, Social, and Governance (ESG) Disclosures on Investor Decision-Making: Navigating the Murky Waters of Impact and Measurement

Abstract

In an era of heightened environmental and social consciousness, the role of Environmental, Social, and Governance (ESG) disclosures in influencing investor decision-making has become a prominent topic of debate. This article delves into the murky waters of this complex relationship, exploring both the theoretical underpinnings and empirical evidence surrounding the impact of ESG disclosures on investor behavior. Drawing upon social science theories and relevant research, we analyze the potential motivations for companies to engage in ESG disclosure, examine the various channels through which such disclosures might influence investor choices, and critically assess the challenges associated with measuring their actual impact.This study investigates the impact of Environmental, Social, and Governance (ESG) disclosures on investor decision-making, focusing on the challenges associated with assessing the true impact and measurement of such disclosures. As sustainability becomes an increasingly important consideration for investors, understanding how ESG information influences decision-making is crucial. The research explores the nuanced relationship between ESG disclosures and investor behavior, delving into the complexities of navigating the murky waters of impact and measurement. Through a comprehensive analysis, the study aims to shed light on the effectiveness of current ESG reporting frameworks and their ability to provide meaningful insights for investors. The findings offer valuable insights for policymakers, corporations, and investors seeking to enhance the transparency and reliability of ESG disclosures.