Integrating ESG Metrics into Capital Budgeting: Survey Evidence from Corporate Finance Executives in India

Unofficial AI-generated summary based on the public title and abstract. Not an official translation.

🔬研究者:Offers a validated PLS-SEM model of ESG integration drivers and mediators, useful for extending to other markets.

🏢実務担当者:Highlights the need to strengthen ESG awareness, culture, and formal processes to move beyond compliance in capital allocation.

🏛政策担当者:Shows the gap between disclosure mandates (BRSR) and internal capital budgeting, suggesting policy levers for deeper integration.

Incorporating environmental, social, and governance (ESG) metrics into corporate capitalbudgeting processes is a key but under-researched frontier in sustainable corporate finance. While ESG factors have been studied at the portfolio, disclosure, and governance levels, there is little systematic empirical evidence on how corporate finance executives are implementing ESG in project-level investment appraisal—with an emphasis on emerging markets. To fill this void, this paper starts with a primary survey of 312 corporate finance executives (CFOs, finance directors, investment managers) from listed and large unlisted Indian firms. Based on stakeholder theory and institutional theory, the paper provides and empirically tests a hierarchical Partial Least Squares Structural Equation Model (PLS-SEM) where four driver constructs (stakeholder ESG pressure, ESG awareness and capacity, organizational ESG culture, governance and ownership support) influence formal ESG-integration processes (mediator), which in turn lead to the integration of the formal budget through an emergent perspective (dependent variable). The structural model accounts for 62% of the variance in the outcome variable (R² = 0.62) and 58% of the mediator variable variance (R² = 0.58). The results indicate that the direct effect of ESG awareness and capability (β = 0.41, p < 0.001) is stronger than any other direct effect while formalized ESGintegration processes are strongest as a mediator (β = 0.61, p < 0.001). All four indirect (mediated) effects are positive and significant (bootstrapped 95% CIs failing to cover zero). This analysis is substantiated with multigroup analyses which show that these effects are stronger in sectors that are more exposed to ESG issues. The report found that, while Indian regulation—particularly the SEBI Business Responsibility and Sustainability Reporting (BRSR)—has moved towards mandated ESG disclosure, there remains a wide gap with respect to capital-allocation practice embedded in covenants. Based on this foundation, the paper presents an empirically tested theoretical framework that delineates the organizational and institutional conditions under which ESG progresses from compliance reporting to a real capital-budgeting change.

• openaire https://doi.org/10.5281/zenodo.20354437first seen 2026-07-09 04:50:03