Integration of Green Accounting and Socially Responsible Investing in Sustainable Financial Development

Abstract

Sustainable finance has emerged as a vital framework for aligning financial systems with environmental protection and long-term economic stability. Green Accounting (GA), which involves the systematic disclosure and reporting of environmental costs and impacts within financial statements, and Socially Responsible Investing (SRI), which directs capital toward environmentally and ethically responsible enterprises, represent two key mechanisms supporting this transition. Although prior research has examined GA and SRI independently, limited empirical evidence exists on their integrated impact within subnational financial ecosystems. Addressing this gap, this study examines the combined influence of GA practices and SRI on sustainable finance development in Kerala, India. Adopting a mixed-method research approach, the study gathered quantitative data from 120 respondents across banks, green-certified enterprises, and ESG-oriented investment platforms, complemented by qualitative insights from 18 key stakeholders. Statistical techniques were utilized to test the proposed hypotheses. The findings reveal that both GA and SRI significantly predict sustainable finance development (R² = 0.568), with green accounting exerting a comparatively stronger standardized effect. Additionally, the combined adoption of environmental accounting disclosures and responsible investment practices significantly enhances firm performance, investor confidence, and long-term financial sustainability. The study emphasizes how sustainability-focused financial integration serves as a strategic driver of stakeholder trust and institutional resilience in addition to being a compliance mechanism. By positioning Kerala as a subnational model, the research contributes to sustainable finance literature and offers policy and managerial implications for embedding environmental accountability within regional financial systems.