Utilizing virtual arts in reforming market players' behavior to invest in sustainability projects

The 1992 Rio Conference highlighted the urgent need for sustainable development, recognizing the interconnectedness of economic development, social well-being, and environmental preservation. A significant obstacle to achieving sustainability is the scarcity of capital for green initiatives. Conventional investment practices often prioritize short-term gains, hindering investment in sustainable projects. Investors often perceive sustainability as risky or less profitable than traditional industries. This study explores the potential of virtual arts, with their immersive and interactive nature, to reshape investor behavior and encourage investment in sustainable projects. China, with its rapid economic growth and environmental challenges, coupled with a thriving virtual arts sector, provides a compelling context for this research. The study aims to understand the correlation between the size of the virtual arts market and private sustainable investment in China, addressing a significant gap in the literature by examining the intersection of virtual arts and sustainable finance, focusing specifically on private investors.

The literature review examines two strands: virtual arts and their impact on behavioral change regarding sustainability, and sustainable finance and factors influencing private investors' decisions. Studies show that virtual arts, including VR and AR, effectively promote sustainable behaviors and raise environmental awareness through immersive experiences. Research on sustainable investment highlights its importance, particularly in developing economies, and its positive correlation with long-term financial performance, risk mitigation, and resilience. Studies on private sustainable investment explore investor motivations, barriers, and preferences, emphasizing the influence of ESG factors, policy frameworks, and social norms. The literature reveals a gap in understanding the specific impact of virtual arts on private sustainable investment in China, particularly the interplay between the virtual arts sector and private investment in sustainable projects within the Chinese context.

This study uses annual data from 1985 to 2021, employing an autoregressive distributed lag (ARDL) model for time series analysis. The dependent variable is private investment in green projects (PIGP), and the key explanatory variable is the virtual arts market size (VAM). Control variables include renewable deployment (RD), economic size (GDP), financial development (FD), social inclusion (SI), and privatization (PRIV). Data sources include The China Statistical Yearbook, China Data Center, China Statistical Database (CNKI), and China Information Network (CNInfo). The ARDL model accounts for various integration levels and allows for endogenous regressors, enabling the assessment of long-term co-integration. The Augmented Dickey-Fuller (ADF) test was used to check for stationarity. A boundary co-integration test was performed to investigate long-term co-integration relationships. Both short-term (Error Correction Model - ECM) and long-term ARDL estimations were conducted. Diagnostic tests (LM, Ramsey RESET, ARCH) were employed to ensure model robustness. A Granger causality test was used to determine causal relationships between VAM and PIGP. Robustness checks were performed by replacing PIGP with green electricity generation as a measure of sustainable investment.

The ADF test showed that after first differencing, PIGP, SI, FD, and VAM exhibited stationarity, while others were stationary at their original levels. The boundary co-integration test confirmed a long-term equilibrium relationship among the variables. Short-term ECM estimations showed that a 1% increase in VAM is associated with a 0.46% increase in PIGP. Long-term ARDL estimations revealed that a 1% increase in VAM leads to a 0.38% increase in PIGP. Social inclusion also significantly influenced PIGP, with a 0.26% short-term and 0.43% long-term increase for every 1% increase in SI. Financial development positively impacted PIGP. GDP showed a positive, albeit smaller, effect on PIGP in both short and long-term estimations (0.05% and 0.07% respectively). Privatization had a substantial positive impact on PIGP, with a 0.35% short-term and 0.23% long-term increase for every 1% increase in privatization. Diagnostic tests confirmed model robustness. The Granger causality test indicated a bidirectional relationship between VAM and PIGP. Robustness checks using green electricity generation as a proxy for sustainable investment confirmed the findings.

The findings demonstrate a significant positive relationship between the expansion of the virtual arts market and private sustainable investment in China, both in the short and long term. The immersive nature of virtual arts likely raises awareness and changes perceptions about sustainable investment, making it more appealing to private investors. The positive effect of social inclusion highlights the importance of a supportive and inclusive social environment for attracting sustainable investment. The positive impact of financial development confirms the need for a robust and well-regulated financial market to facilitate sustainable investments. The results underscore the interconnectedness of various economic, social, and environmental factors in influencing private sustainable investment decisions. The study's findings contribute to a better understanding of how to leverage innovative approaches, such as virtual arts, to promote sustainability.

This study demonstrates a clear positive relationship between the expansion of the virtual arts market and private sustainable investment in China. Policy recommendations include integrating sustainability into education, creating online platforms for sustainable virtual arts, developing green financing markets, and fostering collaborations. Further research could explore the impact of electronic exhibitions and sustainable tourism on private investment in eco-friendly initiatives, and conduct surveys to gather expert opinions.

The study's limitations include its focus solely on China, potentially limiting the generalizability of the findings. The reliance on aggregate data may mask variations at the individual investor level. Further research with more disaggregated data and cross-country comparisons would strengthen the study's conclusions.