Demystifying behavioural biases influencing sustainable investing decisions: a hybrid PLS-SEM and fuzzy DEMATEL approach

Purpose Sustainable investing, encompassing socially responsible investing, follows environmental, social and governance (ESG) standards. This study aims to explore the influence of behavioural biases on the sustainable investing decisions of individual stock investors, mediated by risk tolerance. It also aims to prioritise and identify interdependencies among these behavioural biases. Design/methodology/approach Investor data were collected through a structured questionnaire and analysed using PLS-SEM in SmartPLS. The study also uses the Delphi-oriented fuzzy decision-making trial and evaluation laboratory (Fuzzy DEMATEL) technique for prioritisation and determining interdependencies. Findings The study identifies that overconfidence, availability and herding directly impact sustainable investing decisions and influence investors’ risk tolerance. Regarding mediation, overconfidence and herding partially mediate sustainable investing decisions, availability shows no mediation effect and the status quo fully mediates the relationship. The fuzzy DEMATEL technique identifies availability, overconfidence and herding as the paramount biases, revealing that availability and overconfidence cause the effects of herding and the status quo. Practical implications This study contributes theoretical additions to the influence of behavioural biases on sustainable investing, thereby fostering responsible investments. Originality/value This study offers a novel methodological approach to understanding behavioural biases influencing sustainable investing decisions, with a focus on the mediation of risk tolerance. To the best of the authors’ knowledge, it is also the initial effort to prioritise and determine the cause-effect relationship among behavioural biases influencing sustainable investing. It uses an original hybrid methodology combining PLS-SEM and Delphi-oriented fuzzy DEMATEL in sustainable investing.