THE IMPACT OF AFFECTIVE EMPATHY ON ESG INVESTMENT DECISION-MAKING

Abstract

This study examines the two dimensions of emotional empathy, namely empathic concern and personal distress, and their impact on Environmental, Social, and Governance (ESG) investment decisions. The findings indicate that empathy, as a focused emotional response, enhances investors' sense of social responsibility and encourages them to prioritize ESG projects that generate social and environmental value. It also strengthens the long-term perspective and fosters a willingness to cooperate, thereby providing crucial support for sustainable investment. Personal distress, as a self-centered emotional response, can increase prosocial behavior when experienced at moderate levels; however, excessive personal distress can lead to anxiety and avoidance behaviors, potentially inhibiting participation in ESG investments, particularly in projects involving high risks or complex decision-making. Personal distress prompts investors to prioritize short-term financial returns, reducing their attention to the long-term social benefits of ESG projects. This conceptual study provides a framework for understanding how different emotional responses influence ESG investment decisions. Based on these findings, it is suggested that future research explore strategies to mitigate the negative effects of personal distress and promote empathy in investors to better support sustainable development goals.