Aligning ESG ratings with cultural values: a framework for the German-speaking region

Abstract This study addresses the inconsistencies in Environmental, Social, Governance (ESG) ratings by examining which ESG factors are most important to retail investors in the German-speaking region. To analyze the cultural context, the research applies two established theoretical frameworks: Hofstede’s cultural dimensions theory and Schwartz’s cultural value orientations theory. In addition, the analytic hierarchy process is used to systematically assess and rank ESG factors, with the European Sustainability Reporting Standards serving as the basis for deriving these factors. A survey conducted among retail investors reveals that environmental factors receive the highest priority, followed by governance factors, with social factors ranked as the least important. These findings are compared with ESG preferences in India and South Korea to explore regional differences. The study highlights the need for a standardized and transparent ESG rating system that empowers individuals to make informed investment decisions aligned with their personal preferences and cultural values. This research advances the literature on sustainable finance by demonstrating the significant influence of cultural factors on investment decision-making.