Sustainable Investing  

Why psychometric testing is best for sustainability views

  • Describe the challenges of psychometric testing for sustainability
  • Explain some of the differences in attitude among the generations
  • Explain some of the emotional aspects of investing sustainably

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.

Article continues after advert

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).

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.

What drives those in the high and very high importance profiles?

One of the most significant factors for those who view sustainability as of high and very high importance (approximately 10 per cent) is the emotional benefit of sustainable investing – for example, enjoying knowing that they are having a positive impact and being inspired by the behaviour of companies and how they manage their risks.

However, what is particularly important is how these clients feel when they consider the potential trade-offs, and for these clients the item assessing whether they would like to prioritise their investments doing good rather than harm, even if their returns could be lower, best correlates with and reflects their overall profile, with 92 per cent of these respondents agreeing to some degree with this statement. 

Our data also allows us to explore the differences we observe in sustainability preferences based on demographic backgrounds. Here we consider gender and age.

Age and sustainability preferences

It is expected that younger clients would have a greater preference for sustainable investments due to supposedly being more values-driven, and therefore having a greater desire to seek investments that align with their views.