Sustainable finance has emerged as a global priority; however, retail investors continue to face barriers, such as limited awareness, restricted access, and behavioral barriers that limit the adoption of Green Investments. Hence, this study explores how green financial capability (GFC), a multidimensional construct encompassing green financial literacy (GFL) and green financial inclusion (GFI), influences green investment (GI), with green financial behavior (GFB) as a mediating behavioral mechanism.
The partial least squares structural equation modeling (PLS-SEM) was used to analyze the data and test hypotheses based on a cross-sectional survey of 354 retail investors across North India, with concentrated retail investor growth and clean energy adoption.
The findings indicate that GFC significantly facilitates GI through GFB, which fully mediates the relationship between GFC and GI (β = 0.505, p < 0.001). Furthermore, both GFL and GFI emerge as significant antecedents of GFC, with literacy demonstrating a stronger influence.
The study offers insights for investors, financial institutions, and regulatory bodies to design targeted interventions for enhancing sustainable investments. These initiatives may significantly contribute to achieving Sustainable Development Goals (SDGs) and societal transition through sustainable inclusive growth.
Unlike prior studies that examined financial literacy or inclusion separately, this study integrates both within a capability–behavior–investment framework to explain how investor capabilities translate into sustainable financial actions. It makes a distinct contribution by conceptualizing GFC as a multidimensional construct and examining its direct and indirect influence on GI within the underexplored context of emerging economies.
