Impact of Environmental, Social, and Governance Factors on Investment Decision-Making of Cement Manufacturing Companies in Kenya

Abstract

This study sought to assess the impact of ESG factors on the investment choices made by cement manufacturing companies in Kenya. This study employed a mixed methods design, targeting hierarchical management levels within Cement manufacturing companies, including top management, middle management, and first-line managers (supervisors). A census approach was adopted for this study, whereby all 159 management team members from the eight cement manufacturing companies were included in the study. This approach ensured comprehensive data collection from all three management levels. The study made use of primary data, adopting a well-designed combined closed and open-ended questionnaire for data collection. Correlation, regression and descriptive statistics were used in data analysis. The findings revealed that a significant correlation exists between Environmental, Social, and Governance (ESG) factors and investment decision-making, as shown by a correlation coefficient of R=0.868. The regression coefficient results revealed that all three predictor variables had a positive and significant impact on investment decision-making (p< 0.05). The study concludes that environmental, social, and governance factors play a crucial role in influencing investment decisions within the cement manufacturing sector in Kenya. The study recommends that policymakers concentrate on reinforcing the enforcement of environmental regulations and enhancing their clarity to increase the impact of environmental factors on investment decisions. To encourage businesses to invest in clean technologies and sustainable practices, the government should think about enacting more targeted, transparent, and easily accessible incentives, such as tax breaks, grants, and low-interest green financing.