Opportunities to Increase Financial Well-Being by Investing in Environmental, Social and Governance with Respect to Improving Financial Literacy under COVID-19: The Case of Latvia

The latest studies reveal that the COVID-19 pandemic has pushed investors in developed economies to focus more on the value attached to environmental and social responsibilities. Unfortunately, socially responsible investment and compliance with environmental, social and governance criteria are not given enough priority in Latvia at present. The purpose of the study is to investigate how the COVID-19 pandemic has influenced the willingness of Latvians to invest in assets that meet environmental, social and governance (ESG) criteria and factors influencing investors’ choice based on their financial literacy. Different views on sustainable investments, socially responsible investments and the relevance of environmental, social and governance criteria from private investors’ perspectives were analyzed to identify factors influencing investment decisions in favour of sustainable investments. Quantitative analysis was carried out to reveal the regularities between financial literacy, the willingness to invest to meet the ESG criteria and the level of education and income of the Latvian population, as well as their savings/investment experience. Such statistical methods as descriptive statistics and hypothesis testing were applied to perform an analysis of the results. The authors’ findings include the importance of sustainable investing to Latvian society, changes of attitude towards ESG investing in different private investors’ groups under the COVID-19 crisis, and the effects of these changes on the financial well-being of the population and, on the basis of these findings, have come to the conclusion that the willingness to invest in the assets that follow environmental, social and governance criteria depends on the level of education, savings/investment experience and income level.

The liquidity, performance and investor preference of socially responsible investments

PurposeThe purpose of the paper is to analyze socially responsible investment (SRI) asset performance compared to traditional assets using the MSCI KLD 400 Index. The authors examine the required return that investors expect to maintain their holdings in SRI stock and whether SRI stocks can be used for diversification during financial crises.Design/methodology/approachThe authors examine SRI stocks' liquidity from the MSCI KLD 400 index, encompassing all environmental, social and governance (ESG) factor investments over 25 years, from 1990 until 2019. The authors test whether sorting portfolios based on their excess return, liquidity and volatility can explain the difference in SRI and non-SRI stocks' returns and then examine the global financial crisis' (GFC) impact on excess returns for SRI and non-SRI assets.FindingsThe authors find a significant difference in liquidity and volatility between SRI and non-SRI stocks and that SRI stocks perform better during financial crises. The results suggest a possible general investor preference to invest in non-SRI stocks despite our findings that SRI stocks tend to withstand financial risk better than non-SRI stocks. The authors find that long-term investors may be willing to forego short-term gains to reduce their overall risk exposure during crises.Originality/valueSRI is gaining international popularity as an alternative investment that includes ratings based on ESG factors. Previous studies provide mixed results of whether SRI stocks outperform conventional stocks. In addition, there is limited research examining the liquidity and volatility of SRI assets. The authors compare the differences between SRI and non-SRI stocks in terms of excess return, volatility and liquidity and compare the liquidity of SRI and non-SRI stocks during the financial crisis.

The Empirical Research on the Impact of Pro-Environmental Factors on the Financing Cost of Green Bond

Green bonds are an important part of green finance and a significant financing method for enterprises to make socially responsible investments. This thesis analyzes the impact of pro-environmental factors on the financing cost of green bonds by the data of green bonds issued from 2016 to 2020. The results show that the better the environmental performance of the issuer's region, the lower the financing cost of green bonds, and the third-party certification reduces the financing cost of green bonds. Further research shows that high pollution areas and high pollution industries enhance the punitive role of environmental pollution financing. Regional environmental performance mainly affects the financing cost of green bonds through tax suppression mechanism and credit penalty mechanism, while third-party certification affects the financing cost of green bonds through tax relief mechanism and financing channel mechanism. This paper provides empirical evidence and policy inspiration for reducing the financing cost of issuing green bonds and promoting the perfection of the green bond system.

Introduction to the Special Issue on Sustainable Pensions: Do Sustainable Pensions Require Sustainable Investments?

This Special Issue addresses the concept of sustainability in pension systems from a wide range of perspectives. It examines the central questions raised about sustainable, socially responsible investments and other associated concepts by opening up a comprehensive discussion with an interdisciplinary approach. Normative trends and international cases are analysed in some detail concerning the situation of specific European Member States. Also, the concept of sustainability in European occupational pension schemes is questioned as an efficient vehicle able to assure adequate pension entitlements to all workers to avoid old-age poverty.

Are People Altruistic When Making Socially Responsible Investments? Evidence From a tDCS Study

Socially responsible investment (SRI) is an emerging philosophy that integrates social and environmental impacts into investment considerations, and it has gradually developed into an important form of investment. Previous studies have shown that both financial and non-financial motivations account for SRI behaviors, but it is unclear whether the non-financial motive to adopt SRI derives from investors’ altruism. This study uses neuroscientific techniques to explore the role of altruism in SRI decision-making. Given that existing evidence has supported the involvement of the right temporoparietal junction (rTPJ) in altruism and altruistic behaviors, we used transcranial direct current stimulation (tDCS) to temporarily modulate activity in the rTPJ and tested its effect on charitable donations and SRI behaviors. We found that anodal stimulation increased the subjects’ donations, while cathodal stimulation decreased them, suggesting that tDCS changed the subjects’ levels of altruism. More importantly, anodal stimulation enhanced the subjects’ willingness to make SRIs, while cathodal stimulation did not have a significant impact. These findings indicate that altruism plays an important role in SRI decision-making. Furthermore, cathodal stimulation changed the subjects’ perceived effectiveness of charitable donation but not that of socially responsible fund. This result may help explain the inconsistent effects of cathodal stimulation on charitable donations and SRI behaviors. The main contribution of our study lies in its pioneering application of tDCS to conduct research on SRI behaviors and provision of neuroscientific evidence regarding the role of altruism in SRI decision-making.

A Brief Review of Responsible AI and Socially Responsible Investment in Financial and Stock Trading

Automated trading is used in most of the major markets of our world. In order to ensure sustainable development, incorporating ethical and socially responsible ideas while designing these Artificial Intelligence (AI) systems has become a necessity. Both the industry and the academia are working towards Responsible AI, which can make Socially Responsible Investments (SRI). This paper reviews the research on SRI investment in the financial sector and evaluates these methods, which can help find future research directions in Computational Finance. This survey looks at the machine learning techniques used for ethical decision-making while stock or forex trading, which will benefit any further research work on Responsible AI in Finance.<br>

A Brief Review of Responsible AI and Socially Responsible Investment in Financial and Stock Trading

Automated trading is used in most of the major markets of our world. In order to ensure sustainable development, incorporating ethical and socially responsible ideas while designing these Artificial Intelligence (AI) systems has become a necessity. Both the industry and the academia are working towards Responsible AI, which can make Socially Responsible Investments (SRI). This paper reviews the research on SRI investment in the financial sector and evaluates these methods, which can help find future research directions in Computational Finance. This survey looks at the machine learning techniques used for ethical decision-making while stock or forex trading, which will benefit any further research work on Responsible AI in Finance.<br>