Enhancing Investor Trust Through Sustainable Finance: The Moderating Effects of Regulatory Quality and Economic Policy Uncertainty Among Non-Financial Institutions Listed on the London Stock Exchange

The regulatory framework in the United Kingdom plays a vital role in promoting investor trust and transparency by mandating that enterprises disclose their social and environmental impacts. This makes the UK an appropriate setting for this study. This research examined how sustainable finance influences investor trust in the London Stock Exchange. The study employed purposive sampling along with specified inclusion and exclusion criteria to assess 17 years of data (2007–2023) from 334 non-financial institutions obtained from Thomson Reuters Eikon DataStream. To mitigate cross-sectional dependence and endogeneity concerns in the data, several estimation methods were used, including the Common Correlated Effects Mean Group (CCEMG), fixed effects with Driscoll-Kraay standard errors, and the Generalized Method of Moments (GMM). The findings revealed that corporate emission reduction policies, environmental expenditures, and green bond issuances had a positive and significant impact on investor trust. Additionally, the moderating effect of regulatory quality on emission reduction policies further enhanced investor trust. Based on these findings, companies are encouraged to strengthen their environmental practices by implementing robust emission reduction policies, increasing environmental investments, and issuing green bonds to support sustainable projects. These efforts should be clearly communicated to investors to highlight the company’s commitment to sustainability and corporate responsibility.