Abstract
This study explores the influence of sustainable investment practices, focusing on how firms’ Environmental, Social, and Governance (ESG) activites and environmental disclosure affect the investment sensitivity of environmentally sensitive firms (ESFs). The results reveal that high environment sensitivity firms are more inclined to implement sustainable practices to improve operational efficiency and mitigate risks. The findings explain that ESG and environmental disclosures significantly influence investment sensitivity, with stronger effects observed in high-environment sensitivity firms compared to their low- environment sensitivity firms. Further, the study reveals that bank financing plays a moderating role in the relationship of bank sustainability and investment sensitivity. Additionally, we find that green finance acts as a mediator, reducing investment sensitivity by channeling resources toward sustainable investment initiatives, particularly in high-sensitivity firms. This research underscores the critical role of banks sustainable practices and innovative financing strategies in improving stable and efficient investment decisions.