Behavioural Finance Consulting

Wealth & Asset Management

Sustainable Investing: Challenges and Opportunities

Wealth & Asset Management

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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Key Elements in Investment Suitability

Wealth & Asset Management

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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Why People Should Invest

Wealth & Asset Management

Investing is essential for securing your financial future in today’s uncertain world. As job security declines and traditional pensions become less reliable, relying solely on income or government support is no longer enough. Investing offers a pathway to long-term financial stability by growing your wealth, helping you meet both short-term needs and future retirement goals. Like pursuing higher education, investing requires careful planning, regular contributions, and patience, but it rewards you with future financial security. By adopting a long-term mindset and setting clear goals, you can take control of your financial future and avoid unnecessary debt or financial struggles later in life.

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Sustainable Investing

Wealth & Asset Management

Investing has become a common practice, but today’s investors seek more than just financial returns. The rise of sustainable investing reflects growing concerns about how investments impact society and the environment. Consumers now want their investments to support companies that promote gender equality and inclusion (governance), combat poverty (social), and address climate change (environmental). This shift towards ESG (Environmental, Social, Governance) investing is reshaping how corporate performance is evaluated and how financial institutions develop investment products. For the financial sector, understanding the key drivers of sustainable investment decisions is essential to meet the evolving demands of today’s conscientious investors.

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