Frontiers in Business, Economics and Management

ISSN: 2766-824X | Vol. 7, No. 3, 2023

Research on the Influence of Green Financial

Investment Decision Factors Under the Background of
Environment, Society, And Governance
Zuqi Su
Global Climate Innovation Center, New York, New York, 10022, USA

Abstract: At this stage, with the continuous development of China's socialist market economy, green financial investment has
come into being. Investment and financing operation behavior has become an important economic behavior of enterprises in
addition to production and operation activities and is also a key factor in enhancing market competitiveness. The investment
decision is the core content of enterprise financial management, and scientific and reasonable green financial investment
decisions can provide financing opportunities for more enterprises. This paper analyzes the factors affecting green financial
investment decisions in the context of environment, society, and governance. Companies wanting to maximize profits from green
financial investments need to choose a promising portfolio approach. This paper makes several recommendations to address the
green financial investment decision, aiming to promote the sustainable and healthy development of the investment industry.
Keywords: Environment, Social governance, Green finance, Investment decisions.

reduce corporate environmental costs and improve corporate

1. Introduction environmental benefits. 2022 updated Central Financial
Reducing China's environmental pollution is conducive to "Guideline" emphasizes the establishment of green
sustainable economic and social development. The financial investment funds and helps green industries. The
structure can provide more financial services to companies. promulgation of this document indicates that the state is
Enterprises can make proper decisions based on various green encouraging green financial investment behavior, while the
financial investment service functions. Therefore, green document's content has a guiding effect on green financial
financial investment decisions are conducive to achieving investment behavior.
sustainable economic development of enterprises, building a
well-off society together, strengthening environmental 3. Analysis of the Influence Factors of
protection, and properly handling the relationship between Green Financial Investment
humans and nature. Decision-Making
2. Overview of Green Financial 3.1. Global market
Investment Under the Background The global investment market is in turmoil, and there are
of Environment, Society, And more variables in the market. The spike in oil prices and the
Governance depreciation of the U.S. dollar have had a significant impact
on green financial investments. In particular, rising gold
2.1. Environment, society, and governance prices and declining stock prices have caused companies to
view the dollar factor in global markets. The percentage of
The context of environment, society, and governance refers
green financial investments in global markets, represented by
to the concept and method of social governance to fully
the U.S., is shown in Figure 1.
mobilize all people and forces to achieve environmental
protection and resolve social conflicts caused by It is easy to see from the chart that the United States is
environmental problems. The theory addresses the new firmly in the first place. Its position as a global resource-
concept of environmental governance at the current stage in consuming country, with a quarter of the world's total energy
China. It emphasizes the need for different social agents to consumption, directly impacts global green financial
achieve self-management and environmental protection goals. investment.
The advantages of applying the new environmental, social,
and governance proposition to the green financial investment 3.2. Internet
process are apparent. It can actively prevent and resolve the At this stage, China's science and technology level is
financial investment conflicts among enterprises caused by constantly improving, and Internet technology has been
environmental problems. unprecedentedly developed. By organically integrating
Internet technology and green financial investment,
2.2. Green financial investment enterprises can explore a high-quality path suitable for
The document "Green Investment Guideline (Trial)" sustainable development. Internet technology can aggregate
elaborates that green investment is an investment instrument data and information on green financing and investment
that aims to promote corporate environmental performance activities such as green building and clean energy,
and reduce environmental risks, vigorously develop green comprehensively strengthen the management of green
industries, and use systematic green investment decisions to financial investment services and meet the needs of enterprise

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decision-making.

Figure 1. Green financial investment proportion of global markets in developed countries in 2022

3.3. Relationship between individual and a series of problems to the production and development of
enterprises. Green finance investment decisions based on
institutional investors environmental, social, and governance contexts can pool
Individual green finance investors participate in investment funds to help better enterprises achieve transformation and
decision-making activities as individuals, also known as retail upgrading. Therefore, it is important to understand the
investors. Individual investors have a smaller amount of influencing factors of green finance investment decisions.
investment funds than institutional investors, receive a However, there are still many urgent problems in developing
smaller share of decision-making, and invest at a slower pace, green finance investment decision-making in China, as
resulting in a limited overall investment level. On the contrary, follows.
institutional green finance investors mainly refer to the legal
entities engaged in securities investment, which have a large 4.1. Unsound green financial system
amount of capital, high decision-making power, and many Green financial investment systems first originated in
channels to obtain investment data and information. They can western developed countries. The development of green
make investment decisions in the first instance according to finance in China started late, and the initial stage mainly
the trend of the green finance market and have strong relied on learning Western countries' investment experience
professionalism and investment ability. and models. The financial market is mainly dominated by the
types of financial products provided by commercial banks,
3.4. Other factors such as green financial insurance and green bond products.
In the environmental, social, and governance context, in However, the degree of investment decision of these products
addition to the three factors mentioned above, the degree of is limited, and the development is lagging, which leads to
financialization of the country, the level of investment in expanding the demand in the financial market. Nevertheless,
national pollution control, the income of the population, and the investment decision is not comprehensive enough, thus
the number of educated people all affect the prospects of affecting the improvement of the green financial system. In
green financial investment development. addition, China has a relatively backward model of green
financial investment management, taking IPO green financial
4. Problems in the Development of investment as an example. IPO means Initial Public Offering,
Green Financial Investment and IPO financing refers to a new way of financing using
Decisions equity. It belongs to the common means of enterprise
financing method. To recruit funds for the development of the
Currently, China's green financial investment market enterprise, the enterprise will disclose its financing process of
transaction process is not perfect enough, and the green issuing shares to investors using securities trading, shown in
financial investment decision is not scientific enough. The Figure 2.
traditional growth model of the crude market economy brings

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 Figure 2. IPO financing green financial flow chart

In terms of the different stages of corporate financing, IPO 4.3. Insufficient greening of financial
financing is the way of financing after a company has been institutions
through shareholder financing, Series A financing, Series B
financing, and Series C financing. Under the green financial The environmental, social, and governance context
investment decision, the feedback of enterprise IPO problem emphasizes the pluralistic co-governance of corporate
is mainly reflected as (1) normative problem. It mainly refers environmental protection and self-management. However, the
to the problem of compatibility between enterprises and laws. greening degree of green financial institutions in China is
It includes the competition between enterprises and insufficient, and the development of the green financial
enterprises and examines whether there are potential legal market is still in its infancy and has not entered the ranks of
disputes between them. (2) Information disclosure issues. The rapid development. The investment projects introduced by the
scope of corporate equity disclosure issues is mainly related state and government are not green enough, and no more
to the prospectus disclosure aspects. Although enterprises can green financial investment business has been launched to
avoid the normative issues mentioned above to a certain meet the actual development needs of enterprises. At the same
extent, there are still management problems. The common time, enterprise managers do not understand the green
problems enterprises face are their business model's concept well. They only understand the knowledge related to
truthfulness, validity, and market share. There is no financial greening from the superficial level and do not dig
supporting system established in work mentioned above of deeper into the essence of green financial investment, which
green financial investment, and there is also a lack of affects the decision-making level of green financial
feedback mechanism and supervision mechanism for green investment of enterprises.
financial investment decisions, resulting in a lack of a sound
green financial system. 5. Effective Strategies to Improve the
Level of Green Financial Investment
4.2. Narrow coverage of green financial Decision-Making
services
In the context of environment, society, and governance,
The coverage of China's green financial services whether the investment decision of green financial enterprises
investment field is relatively small, covering only a small
is correct will directly affect the business production activities.
number of projects in the national economy industry. There is This paper systematically discusses three aspects: improving
a big gap between the types of green financial investment the green financial system, giving full play to the function of
products, service scope, investment paths, and means
financial services, and achieving the development of carbon
compared with those of western developed countries. In
intensity reduction.
addition, China's coverage of green financial services mainly
focuses on green credit. Although the credit products consider 5.1. Improve the green financial system
environmental factors comprehensively, the late power of To sound the green financial investment system, enterprises
credit financing is insufficient, and the economic cycle need to integrate the green investment concept in the
performance of credit is poor, directly hindering the operation process. According to their actual development
development of China's green financial investment industry. situation, enterprises must learn green financial investment

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methods and master the green investment process. For of energy saving and emission reduction of enterprise green
example, enterprises can adopt the TOT model for investment finance. The three ways to reduce carbon light development
according to the social development situation. By selling are as follows. First, effectively reduce the efficiency of credit
existing green finance projects, enterprises can obtain cash utilization for green financial investment decisions.
flow within a limited period. It is a new way of investing in Enterprises can increase the proportion of investment in clean
project finance financing, where projects that have been put and new energy projects in the development process and set
into production and operation are handed over to investors for up special corporate funds to support the application of green
a defined period to be operated and managed in a process that financial technology. Banks and other financial institutions
is carried out on a cash flow basis. Another example is that can provide green financial investment services, loan
green financial investment requires accelerating the turnover programs for enterprises, etc. Second, enterprises should
of accounts receivable and inventory and establishing a green scientifically and reasonably adjust the layout space of green
investment system. The first step of investment is to financial investment in low-carbon industries, innovate low-
accelerate the turnover rate of accounts receivable and further carbon financial service methods, reduce green loan interest
improve the turnover rate of corporate inventory in rates, and optimize the effect of green financial investment
conjunction with the actual situation of corporate equity to decisions. Third, further, increase the operation of green
ensure that the inventory management data is accurate. It can investment products. In the context of environment, society,
reasonably optimize the enterprise investment capital, and governance, green financial service investment models
improve the operational level of green financial investment can incorporate investment evaluation methods, organize
decisions, strengthen risk awareness, and improve the work corporate low-carbon production into green evaluation
of internal audit institutions. At the same time, this approach reports, and improve the green environment of corporate
can strengthen green financial investment management and production and operation following green financial
supervision and strengthen the application control of investment programs. For example, enterprises can
investment management information systems to establish the incorporate green investment products into decision
correct green financial investment decision-making concept mitigation, actively adjust green investment projects, and
and decision-making scheme. regularly track and record green financial investments.
5.2. Give full play to financial services 6. Conclusions
Affected by environmental, social, and governance factors,
In summary, implementing China's green financial
China's green financial investment decision-making work
investment decision-making in the context of environment,
toward green investment as one of the core concepts of
society, and governance is an innovative force for the
enterprise development. To improve the level and degree of
development of modern enterprises and the financial industry,
green financial development, give full play to the green
as well as an essential step for modern enterprises to achieve
financial service decision-making function, and seek more
industrial transformation and upgrading. Enterprises can only
profit and benefit for their development, enterprises mainly
improve the overall level of investment decision-making by
start from the following two aspects. On the one hand,
actively using scientific and reasonable green financial
proactively adjust the green financial investment decision-
investment methods under the concept of implementing
making structure. Enterprises should take protecting the
environmental protection and sustainable social development
natural environment, maintaining ecological balance, saving
policies. In conclusion, the green financial investment
ecological resources, and promoting coordinated regional
decision is the key content of the innovative development of
development as their investment decision objectives.
the enterprise industry, aiming at regulating the capital supply
Transform the traditional production and operation activities
of green financial investment decisions and developing
in the past into business decisions based on environment,
towards an environment-friendly society.
society, and governance, and constitute an investment service
process with high-quality service, strict management, and
good operation. On the other hand, many sides cannot carry
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