Are Generation-Z Investors Ready for Sustainable Finance? The Impact of Financial Literacy on ESG Investment Intention in Pakistan
DOI:
https://doi.org/10.22555/pbr.v27i4.1552Keywords:
Financial literacy (FL), financial confidence (FC), risk tolerance (RT), ESG investment intention, sustainable finance, Generation Z, Pakistan stock exchangeAbstract
The primary objective of the study is to examine how financial literacy shapes governance practices and investment decisions among Pakistani Generation Z regarding environmental and social norms. In this relationship, financial confidence and risk tolerance were taken as the mediating variables. Primary data were gathered using a Google Forms survey targeting Generation Z investors in Pakistan who have at least a month of stock market experience, execute at least 1 trade per month, and are conversant with ESG financial tools. The current research study used 401 valid responses. A non-convenient sample was used in the study, and the snowball sampling technique was used for the collection of data by using a well-structured questionnaire based on the existing scales. Partial least squares structural equation modeling was investigated using the SmartPLS program. The study results showed that financial literacy had a significant positive impact on the intention to make investments in the field of environmental, social, and governance (ESG) (? = 0.435, p < 0.001). Financial confidence and risk tolerance were mediating variables; their combined positive influence on willingness to invest in ESG was (? = 0.403, p<0.001) and (? = 0.275, p<0.001), respectively. The overall advantageous impact on financial confidence (? = 0.358, p < 0.001) and risk tolerance (? = 0.614, p < 0.001) was positive with financial literacy. The linkages between ESG investment and financial literacy using financial confidence were (?= 0.144, p<0.001), and using risk tolerance were (?= 0.169, p<0.001). The model described 66.3% of the variance in the ESG investment decisions (R2 = 0.663). Additionally, this study contributes to the creation of an insight into the most pertinent factors influencing Gen-Z ESG investing intentions in Pakistan. It is one of the few works providing an understanding of sustainable finance in the emergent market and serves as a guideline to policymakers, financial organizations, and scholars who are interested in encouraging young people to invest in the Pakistan Stock Exchange through ESG
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