Behavioural Finance Consulting

BFC

Carbon Footprint Calculators: Why Are They Failing to Drive Sustainable Change?

Sustainability

Carbon footprint calculators can promote sustainable behaviours, help consumers save money, and support eco-friendly decisions by translating purchases into measurable CO2e data. However, many users find them abstract or unrelatable, limiting their impact. A key issue is the lack of clarity around CO2e. While scientifically sound, it is difficult for consumers to interpret without relevant benchmarks. Even when understood, linking emissions to purchases remains a challenge, as most tools lack actionable insights. The disconnect between consumer effort and real impact further weakens motivation, as substantial lifestyle changes sometimes yield minimal reductions, discouraging engagement. To be effective, calculators must provide clear benchmarks, relatable comparisons, and incentives to drive meaningful, lasting behaviour change.

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Sustainable Investing: Challenges and Opportunities

Investing

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)

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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Women Are Changing the World of Investment

Women in Finance

Women are emerging as powerful forces in the investment world, set to control nearly 45% of assets under management in Western Europe by 2030. Despite this growth, financial services often fail to address women’s distinct needs and preferences. Women typically favour cautious, diversified, and low-risk investments, with a strong interest in sustainability and ESG-focused solutions. However, barriers such as limited funds, complex financial jargon, and a lack of visible role models hinder their full participation. Addressing these challenges and aligning financial services with women’s priorities—such as long-term planning and wealth preservation—is crucial for fostering financial inclusion and driving meaningful change in the investment landscape.

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Key Elements in Investment Suitability

Advisory Services

Assigning an appropriate portfolio to a client requires a deep understanding of their financial goals, personal preferences, and financial capacity. For accurate investment suitability assessment, the risk assessment framework must consider four critical dimensions: financial capacity (quantitative dimension), psychological tolerance to risk (qualitative dimension), financial knowledge and experience (cognitive dimension), and ESG values (values-based dimension). These dimensions offer a robust foundation for structuring investment recommendations that align not only with the client’s financial needs but also with their psychological comfort and personal values. Integrating these perspectives into suitability assessments fosters informed decision-making, enhances client satisfaction, and supports comprehensive risk management over time.

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Investment Suitability and Portfolio Reporting – Part 2

Advisory Services

Investment suitability is strongly influenced by how portfolio information is presented. Variations in content and format can shape investors’ risk perception and tolerance, potentially leading to skewed assessments and suboptimal investment choices. Discrepancies in presenting returns (net vs. cumulative, percentages vs. monetary), risk ranking, performance order, and format (tables vs. graphs) can alter investor judgement, impacting their understanding of risk and potential gains. A transparent, consistent presentation framework that minimises cognitive biases and supports informed decision-making is essential to align investments with investors’ true risk preferences and financial goals.

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