ESG Investment Among Retail Investors: A Systematic Literature Review and Future Research Agenda

Purpose: Despite firms increasingly using ESG disclosures to signal their sustainability practices, there is limited understanding of how retail investors—an increasingly influential group—engage with ESG information in investment decision-making. This study addresses this gap by systematically examining literature at the intersection of ESG investing and retail investor behaviour.
Design/methodology/approach: We adopt a systematic literature review (SLR) methodology, screening 7,768 publications from 2004 to 2024. Detailed bibliometric and content analyses are conducted on 57 highly relevant studies, all published in journals rated 3* or above in the Academic Journal Guide.
Findings: Our review identifies key factors shaping retail investors’ ESG engagement: (i) activation and awareness driven by major ESG events and information searching; (ii) attitudes shaped by the credibility and transparency of ESG data, influenced by assurance practices; (iii) actions influenced by behavioural biases, nudging, and institutional constraints; and (iv) portfolio adjustments in response to ESG information updates. We propose revamping the 5A model to incorporate retail investor heterogeneity and combined theories to examine their influence and triggers across each stage of the process.
Originality/value: This study presents the first SLR at the intersection of ESG investing and retail investor behaviour. We propose a novel classification based on issue focus (environmental, social, governance, or integrated), revealing that retail investors typically treat ESG holistically. Key future research directions include cross-country and longitudinal analyses, applying machine learning to retail ESG data, and further exploring how retail investors engage with different accounting-related ESG information, such as disclosures, sustainability reports, ratings, and assurance.