Empirical Analysis on Investor Behaviour and Sustainability Preference in Green Bond Adoption in Urban Bengaluru

Abstract

This research investigates the determinants of investor behaviour and sustainability preferences on the adoption of green bonds in the burgeoning Indian financial sector, specifically in Bengaluru Urban. This examines the interplay of financial literacy, risk perception, investor trust, and environmental values in influencing investors' willingness to utilise sustainable financial products. Primary data were collected from 312 individual investors using a purposive sampling strategy using a structured questionnaire. The analysis was conducted using SmartPLS 4.0's Structural Equation Modelling (SEM). The bootstrap resampling technique was employed to assess the reliability and significance of the path correlations among constructs. The findings indicate that financial literacy and knowledge of green finance are the two paramount factors facilitating the purchase of green bonds. Investors with greater financial knowledge exhibit increased confidence and trust, hence enhancing their propensity to adopt. Risk perception and investor confidence emerged as critical factors, as risk-averse investors are disinclined to participate without assurances of the openness and credibility of green bond issuers. Preferences for sustainability, characterised by environmental concern and a commitment to social responsibility, are strong predictors of investment willingness, suggesting that ethical reasons might mitigate modest financial anxieties. The study identifies many barriers, including insufficient market knowledge, concerns regarding market immaturity, and the potential for green washing, despite the researcher’s commendable aims. The findings indicate that India requires targeted legislative modifications, enhanced investor education, and standardised reporting mechanisms to boost investor trust and accelerate the development of its green bond market, hence facilitating the attainment of overarching sustainability objectives.