ESG literacy and financial literacy among future business professionals: Exploratory evidence from a developing economy

Abstract

Growing emphasis on environmental, social, and governance (ESG) criteria in financial decision making has created demand for individuals who can interpret and act on sustainability related information, yet individual level ESG literacy remains empirically underdeveloped, particularly in developing economies. This study explores the cognitive structure of ESG literacy and its relationship to financial literacy among 340 management and commerce students using a quantitative, cross sectional, exploratory research design. Reliability analysis and exploratory factor analysis via principal component analysis were employed to validate both constructs and identify their underlying structure. Results indicate that ESG literacy constitutes a reliable and internally consistent construct (Cronbach's alpha = 0.847; KMO = 0.914), with a dominant single factor accounting for 37.37 percent of total variance, reflecting a holistic cognitive capability for understanding, evaluating, and applying ESG information. Financial literacy similarly yielded a unidimensional structure (Cronbach's alpha = 0.863; KMO = 0.924), capturing applied financial competency inclusive of ethical and sustainability considerations. Discriminant validity analysis confirmed the two constructs as empirically distinct despite their positive association, suggesting that sustainability oriented cognition complements and extends conventional financial competence. The study contributes to sustainable finance and financial literacy research by providing individual level empirical evidence of ESG literacy as a form of sustainability oriented human capital, and offers implications for curriculum design, business education policy, and the integration of ESG cognition into existing financial literacy frameworks.