Cognitive biases in ESG investing—uncovering psychological barriers to biodiversity-positive finance

Rafal Chudy and David N. Barton

Chapter 20 in Handbook of ESG Investing, 2026, pp 490-506 from Edward Elgar Publishing

Abstract: Investors can play a crucial role in advancing sustainable development through Environmental, Social, and Governance (ESG) strategies. Yet, psychological factors, particularly cognitive biases, may limit capital allocation to biodiversity-positive investments compared to options perceived as more effective at minimizing financial or physical risk. This study systematically reviews the literature on cognitive biases in ESG investing, with a focus on biodiversity considerations. From an initial pool of 4,066 academic papers, around 40 articles were identified as contextually relevant to the role of cognitive biases in biodiversity-related ESG investments. Few studies explicitly examined this intersection, underscoring a significant research gap. Our findings reveal both limited and sometimes conflicting evidence, reflecting the lack of standardized concepts and inconsistent measurement of variables across studies. The review highlights the need for further interdisciplinary research bridging behavioural finance, psychology, and conservation science to better understand cognitive barriers to biodiversity-focused investment decisions.

Keywords: Cognitive Biases; ESG Investing; Biodiversity Finance; Behavioural Economics; Sustainable Investment; Systematic Review (search for similar items in EconPapers)
Date: 2026
ISBN: 9781035322770
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