Sustainable finance is an essential method of combating climate change, reducing social inequity, and creating a more resilient economy over the long term, while still providing responsible capital allocation. This research uses a conceptual and descriptive method of analysing the role of knowledge about sustainable finance products (e.g., green bonds, ESG-based stocks/bonds) in enabling investors to use these types of products. The research reviews the latest academic research on investor behaviour as well as the current regulatory framework around sustainable finance. It also examined policy papers on sustainable finance. All sources provide insight into how investment literacy, regulatory support, technological innovation and transparent ESG reporting impact investor confidence and engagement in the area of sustainable finance. The research indicates that major barriers exist to increasing sustainable finance involvement among retail investors. Some of these barriers are the lack of information regarding the types of sustainable finance products available, the complexity of the various sustainable finance products, the absence of uniform standards to measure ESG performance and the concern that many sustainable finance products may in fact be greenwashing. By examining case studies on the development of sovereign green bonds in India and examining the growth of ESG mutual funds in India, it is clear that as retail investors become more educated about the area of sustainable finance, they will ultimately move toward making investment decisions. The findings of this research indicate that retail investors are more willing to invest in sustainable finance products when they are provided credible data, supported by regulatory oversight and provided educational programs that enable them to expand their investment literacy. Without the collective efforts of policymakers, the financial sector, the education system, and society as a whole, sustainable finance will not become a truly mainstream and impactful driver of economic development, increased environmental sustainability, and long-term financial stability.
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