Behavioural Finance Consulting

January 2025

Sustainable Investing: Challenges and Opportunities

Sustainable investing is experiencing rapid growth, driven by increasing consumer demand for financial products aligned with environmental and social values. However, significant barriers remain, including inconsistent ESG criteria, greenwashing concerns, and a lack of clear, measurable disclosures. Regional regulatory initiatives like the EU’s SFDR and the UK’s SDR aim to improve transparency, yet the absence of a global ESG framework continues to hinder investor confidence. Compounding the issue, limited financial literacy and widespread scepticism towards sustainability claims prevent many investors from acting on their ethical intentions. Addressing these challenges is crucial to unlocking the full potential of sustainable finance.

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AI in Finance – Ethical Challenges

Artificial Intelligence (AI) is transforming the financial services industry, enabling advancements in personalised investment advice, smart credit solutions, and AI-driven underwriting. Alongside these opportunities, ethical challenges emerge, such as risks of discrimination, deceptive practices, and diminished customer trust. Integrating behavioural science principles can help financial institutions address these challenges by mitigating data biases, ensuring fairness in credit scoring, and aligning AI systems with ethical standards. Global regulatory frameworks, including the EU AI Act and OECD Principles, provide essential guidance for promoting responsible AI practices in finance. Embedding fairness, inclusivity, and transparency into AI applications strengthens customer trust, supports societal welfare, and fosters a sustainable, client-focused future for financial services.

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