Talking with those interested in sustainable investing, you often hear the 81% statistic mentioned – the 81% of retail investors surveyed by the FCA that want their money to do some good as well as achieve a financial return. It’s an inspiring figure, encouraging us to bring actuality closer to aspiration. The Investment Association’s December 2024 statistics revealed currently around 13% of retail funds under management are held in “responsible funds”.
FCA regulation about sustainable investment advice is long-awaited. Without clear guidance or prescription, some advisers have let client preferences drop down the priority list. Other than the occasional person who puts their values out there, discussion of sustainability is often avoided by advisers and clients. It can be a tricky topic that requires time and temperance.
Frequently in finance, for every problem, there’s a product. When it comes to exploring sustainable investment preferences, that product might be a client questionnaire. In my opinion, however, firms should assess the use of questionnaires as carefully as they would a platform, an investment solution or their approach to risk preference assessment. While their use may indicate that greater attention is given to clients’ sustainable views, they can also generate imperfect outcomes. Word count does not permit a full critique or exploration of best practice here, but I would suggest that the following key points should be considered.
Does the length, language and complexity of the questionnaire create a good client experience? Does it ask the client for an opinion on something they might not fully understand? You might confuse finance professionals if you asked them how important it is that an investment has a theory of change and defines measurable objectives about positive environmental impact.
Would all clients understand what they are ranking or that this is sending them down a Sustainability Impact label route? Is it appropriate to confine the exploration of a client’s values, fears and appetite for impact by leading them along a specific investment path?
From forthcoming research carried out by Dr Alan Whittle (2025): “As with the assertion investors are Impact-First or Finance-First (Rangan et al., 2012), these concepts might be applied more appropriately to the investments themselves, not the investors. Unlike cats, people don’t fit comfortably into little boxes.”
Some questionnaires set out to test how sustainable an investor is, not just in absolute terms but also, relatively, in relation to others. They place the individual in a category – such as finance-focused, good citizen or green champion. I agree that it is important to give the client context, as few of us want to be a first footer or miles behind the curve. However, it is risky to stick a client straight into a box based on a suite of questions that may not be relevant to them, have a certain bias or may have been misinterpreted.
I have noticed a few questionnaires using terms such as “are you inspired by”, “excited by” or “passionate about” when assessing client reactions to sustainable investing. This is a bit like asking us to score ourselves on our love for cars or trainer brands – not all of us will reach the realms of passion and excitement about these products, but that doesn’t mean we don’t need and use them. By creating language lines that need to be crossed, you may not be greenwashing, but you could be greenquashing.
If you are not sure how effective a questionnaire is, then please road-test it, whether with some helpful clients, staff or family and friends. I am bemused that one questionnaire ranked me 3 out of 5 on the range of sustainable investment personalities. I don’t fly, get an electric bus to work, am vegetarian, a member of the Green Party and actively campaign for climate action and sustainable finance. I wonder what you need to do to be a 5!
One questionnaire assesses a client based on their lifestyle, but is this sensible? Is it fair to assess based on whether a client has reduced their meat intake (they may have been vegetarian for years), drives an EV (they may cycle or live in an area where charging is impossible) or has introduced sustainable practices at work (some people have more scope to do so than others).
Finally, I question whether it is fair to expect a client to complete a multi-paged form in order to be able to invest in a sustainable fund or strategy? We don’t, after all, expect such behaviour to assess whether an active or passive fund or an ongoing advice service is suitable. Are we suggesting that the client has to go the extra mile because they might want something we don’t really want them to have, or that is fraught with complexities? Questionnaires are not the only way to guide both adviser and client through this process. I would suggest the adviser has to start by giving (educational material), rather than taking (time and decisions) from the client.
With social, environmental and economic stability teetering on a knife edge, there is no area of financial planning where an honest, informed conversation is more necessary. Although achieving this conversation is not easy and requires both adviser and client education, I am not convinced the off-the-shelf questionnaires I have seen thus far are a suitable substitute.
