Risk return perception and trust in ESG information shape sustainable investment decisions among middle-income retail investors

The growing focus on sustainable investing signals a shift in investor interest as ESG factors are integrated into their investment decisions. However, favourable ESG attitudes do not always translate into a willingness to invest sustainably, particularly among middle-income retail investors in emerging markets. This study investigates the attitude towards ESG investing and willingness to invest sustainably using Theory of Planned Behavior and Behavioral Reasoning Theory. The proposed model examined the mediation effect of risk–return perception and the moderation effect of trust in ESG information. Partial Least Squares Structural Equation Modeling (PLS-SEM) was employed to analyse the survey data gathered from 496 middle-income retail investors in India. The results indicate that attitude towards ESG investing directly and indirectly impacts willingness to invest sustainably, with the most powerful impact coming through risk–return perception. Further, trust in ESG information reinforced the moderated relationship between Attitude toward ESG investing and risk–return perception. The findings suggest that sustainability preference alone is insufficient to shift investment behavior toward sustainability if there is a lack of financial reasoning and confidence in ESG information. The study adds to the behavioural finance and sustainable investment literature by offering a better understanding of the behavioural and financial drivers behind sustainable investment decisions, and offers practical guidance on how to foster responsible capital allocation, improve sustainable finance, and support the Sustainable Development Goals (SDGs), especially in emerging economies.