Behavioural Finance Consulting

ESG Criteria in Investments

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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