Why psychometric testing is best for sustainability views

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.

It is expected that younger clients would have a greater preference for sustainable investments.

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.

Our findings show that there is a negative correlation between age and client’s score on our sustainability questionnaire; younger clients tend to score more highly, however this relationship is weak. 

Figure 2: Proportions of clients within each sustainability profile based on generation (May 2021-December 2022)

When we classify clients based on their generation then we find that a lower percentage of millennials view sustainability as of “some” importance while a higher percentage view sustainability as of “high” or “very high” importance compared to all other generations (see figure 2).

However, the weak correlation becomes apparent when we observe that fewer boomers (II) have a “low” importance sustainability profile while more are within a “medium” profile, in comparison to all generations. Overall, there are consistent patterns across generations that shows around 30 per cent of clients view sustainability as of low importance.

A psychometric approach involves creating a psychological and statistical model that can be tested and monitored over time.

Gender and sustainability preferences

Regarding gender differences, our results are in line with findings that show women are more interested in sustainable investing than men, but importantly we consider the perceived degree of importance.

We observe that of those who view sustainability as of “medium”, “high”, or “very high” importance, a significantly higher proportion of clients are women. In contrast, of those who view sustainability as of “low” or “some” importance when considering their investments, a significantly higher proportion are men (see figure 3).