How ESG Affects Investment Decisions (Risk, Return, and Firm Value) | Sustainable Finance Ep. 3
In this video, Prof LJ explains how Environmental, Social, and Governance (ESG) factors influence investment decisions in sustainable finance. ESG serves as an implementation mechanism of sustainable finance by helping investors evaluate non-financial risks and opportunities that affect long-term financial performance.
The lesson explains the three components of ESG—environmental, social, and governance—and how these factors influence firm value, risk exposure, and long-term financial performance. It also discusses how investors apply ESG in practice through ESG screening, ESG integration, and ESG scoring.
In addition, the lesson presents research findings showing that strong ESG performance is associated with lower risk, improved long-term returns, and better risk-adjusted performance. Real-world applications such as ESG funds and institutional investor strategies are also discussed.
This video is part of the Sustainable Finance Series: Financing the Future (Episode 3) of Prof LJ Learning Hub.
Topics covered:
• ESG in sustainable finance
• Environmental factors and financial risk
• Social factors and firm value
• Governance and financial stability
• ESG screening, integration, and scoring
• ESG and firm value
• ESG and long-term investment performance
• Real-world ESG investing practices
References:
Busch & Friede (2022) – ESG and financial performance
Fatemi, Glaum & Kaiser (2021) – ESG and firm value
Krueger, Sautner & Starks (2020) – ESG and investor behavior
OECD (2021) – ESG and corporate governance
This lesson is designed for students of finance, accounting, sustainability, and business, as well as professionals who want to understand how ESG affects investment decisions, firm value, and long-term financial performance.
For the full Sustainable Finance series, please access the playlist here: • Sustainable Finance – ESG, Green Finance, ...
Captions are available to support accessibility and learning.
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