Why psychometric testing is best for sustainability views

Next steps involve analysing how those items cluster and work together to define multiple dimensions of the variables being measured, understanding which items are not relevant or are in fact redundant and how individual items impact and reflect the overall measure and result. 

Views on sustainability

Our statistics, based on questionnaires being completed by more than 4,000 advised clients each month, show that from conception to the end of 2022, around 70 per cent of clients feel that sustainable investing is at least of some importance to them (see figure 1 below).

Clients do not always think about how the behaviour of companies they invest in impact the environment and society.

For 39 per cent of clients, while sustainability is not the most important thing, they would want some consideration of sustainability to be made within recommended solutions.

For these clients, solutions therefore do not necessarily need to be rated average amongst their peers when assessing the underlying holdings across a broad range of ESG criteria.

Although there have been small fluctuations in the degree of importance throughout the past 18 months, we consistently observe this pattern of results that reflects research within this field.

Figure 1: Distribution of sustainability profiles (May 2021-December 2022)

In addition to examining the overall views of advised clients, it is also useful to analyse individual items within our psychometric questionnaire considering the psychological factors that influence sustainability preferences.

Most and least important aspects of sustainable investing

A high percentage of clients agree that encouraging companies to improve their environmental and social impact is the right thing to do for the future (83.1 per cent of clients), and that they would enjoy knowing their investments positively impact the environment and society (66.9 per cent of clients).

What is particularly important is how these clients feel when they consider the potential trade-offs.

However, clients do not always think about how the behaviour of companies they invest in impact the environment and society (35 per cent of clients), may not feel it is important that their personal values and beliefs are reflected in the companies they invest in (28.5 per cent of clients) and may not want to prioritise their investments having a positive impact if their returns may be lower (24.5 per cent of clients).

Aspects of sustainable investing that best reflect overall views

Correlations between how clients respond to each item and their overall sustainability profile allows us to examine items that best reflect a client’s overall stance.

The highest correlated items relate to clients prioritising helping to improve the environment, prioritising investments doing good rather than harm, even if returns could be lower, and enjoying knowing that investments have a positive impact on the environment and society.