24 Aug 2022

On 24 Aug 2022, SGFIN’s Professor Sumit Agarwal delivered a lecture titled "The Intersection of Behavioural Finance and Sustainability and Green Finance" in a virtual interactive session as part of the NN Investment Partners’ Sustainable Investing Summer Course.

Drawing from a distinctly Asian perspective, Prof Sumit explored the intersection of behavioural and sustainable finance. He explained the behavioural factors contributing to the disconnect between scientific findings and investor actions on climate change, and how behavioural finance could transform capital flows into ESG investments. Reflecting on 2021’s COP26, he quotes India’s climate minister, Bhupender Yadav, to illustrate why the goal shifted from 'phasing out' to 'phasing down' coal, emphasizing the necessity for some nations to prioritize poverty eradication and complex development agendas. He stressed that investors should learn that “sustainability is not orthogonal to profitability” as “in the long run, sustainable organizations are expected to have a higher survival rate, as resilience helps companies avoid crises and recover from shocks,”

Delving into behavioural finance, Prof Sumit talked about why financial decisions often go awry. He asserted that rational investors would likely only invest in sustainable stocks but that investors do not always act rationally. Issues such as the misassessment of probabilities, seeing patterns in random events and allowing emotions to cloud one’s judgment are common stumbling blocks.

Prof Sumit concluded his lecture by acknowledging the complexity of sustainable investment strategies and advised approaching them with caution, potentially seeking professional assistance.