Your Questions Answered
At A2Sustainability, we have developed a robust and reliable system to assess individual investors’ attitude towards sustainable investing.
The financial services and regulatory landscapes are continuously evolving with regards to sustainability approaches, and we continue to work hard to stay ahead of the changes.
Here we address some of the most commonly asked questions about our products and sustainability in general. For more detail, you can read our latest insights on our blog, or if your question isn’t covered here, please get in touch directly.
There are several definitions of sustainable investing and a wide range of approaches. Categorisation of approaches varies, but the Investment Association – which represents UK-based asset managers – uses five groups.
Integrated approach: Funds using this approach incorporate the consideration and analysis of sustainability-related risks into all investment processes. This allows the manager to assess the risks and opportunities arising from sustainability issues, as well as traditional financial considerations.
Exclusion-based approach: Also known as ‘negative screening’, this describes strategies that screen out certain types of assets based on rules or limitations. For example, funds may exclude tobacco companies or weapons manufacturers from their investable universe.
Thematic investing: These funds focus on specific sectors, industries, or assets linked to a particular theme. For example, there are a growing number of funds dedicated to investing in renewable energy companies.
‘Best in class’: Also known as ‘positive screening’. These funds use a set of criteria, either developed by the asset manager or an index or data provider, to rank companies based on their environmental, social, and governance qualities. Fund managers will then allocate to companies with the best scores.
Impact investing: Impact funds aim to make a specified, tangible positive environmental or social contribution as well as a financial return. For example, a fund may seek to invest in companies that provide financial services to underserved communities.
An individual’s attitude to sustainability is an important part of their profile as an investor. Regardless of specific sustainable investing rules, advisers should seek to understand this to help inform their advice and portfolio construction decisions.
Environmental, social and governance criteria are also forming a more and more important part of asset managers’ investment strategies. There are a wide variety of approaches – as outlined above – and new funds are being launched all the time. Understanding these strategies and which are suitable for your clients is a vital part of ensuring you provide a robust service.
In short, assessing attitude to sustainability is crucial to ensuring you can understand and meet your clients’ needs and objectives.
No. We have designed our questionnaire to comply with multiple regulatory approaches as we believe that assessing sustainable investing preferences will become an important feature of regulation in many parts of the world in the years ahead.
Currently, our Attitude to Sustainability Questionnaire has been designed to generate outputs that can be mapped onto sustainable investment labels and classifications from UK and European regulators.
We are actively monitoring developments in these and other jurisdictions, such as Australia and the US, to track how sustainability and suitability approaches are evolving.
Contact us for more information about suitability, and how our Attitude to Sustainability Questionnaire can help your organisation.
Our tools are designed for people involved in the advisory process. We have primarily developed the ATSQ to support financial advisers in assessing and understanding their clients’ attitude towards and appetite for sustainable investing.
However, as with our risk profiling tools, the questionnaire can also support suitability processes for robo-advisers and other similar distribution services.
In addition, employee benefits consultants may find the ATSQ to be a useful tool when developing investment approaches for pension schemes or advising staff.
A2Sustainability is not authorised to provide investment advice and cannot deal with individual investors directly. The ATSQ should form part of the wider discussions and processes around suitability and investment approaches.
Contact us for more information about how the Attitude to Sustainability Questionnaire can help your organisation.
The Attitude to Sustainability Questionnaire is designed to give you, as an adviser, a clear indication of your clients’ views on sustainable investing. It has been developed to facilitate further conversations about sustainable investing, appropriate strategies, and portfolio construction.
Outputs from the questionnaire can be mapped onto fund categorisations such as the European Union’s Article 6, Article 8, and Article 9 definitions. However, you should always conduct additional research and discuss carefully the options with your clients.
Like our long-established and market-leading Attitude to Risk Questionnaire, the Sustainability Questionnaire is designed to form an important part of a wider conversation. Whether discussing a client’s attitude to risk or sustainable investing, our tools can support you in making appropriate decisions.
We have developed a robust, scientifically tested set of 10 questions to assess an individual’s attitude to sustainability.
This allows the questionnaire to collect enough information about an individual investor without overwhelming them. Psychometric testing such as this has been shown to fit with a realistic expectation of the average person’s attention span.
Some companies that provide investor risk analysis tools will use shorter or longer questionnaires. However, by using a shorter questionnaire the importance of each answer increases, which means any errors can dramatically skew the end result – rendering it useless.
Longer questionnaires can also have issues. The additional detail these tests provide is often not necessary. People filling out the questionnaire can become bored if it is too long, which can make later answers less reliable.
All our questionnaires are designed based on the established science of psychometrics. This practice measures psychological aspects of individuals – such as their attitude to risk or sustainable investing – and turn abstract ideas into outputs that are easier to understand and act upon.
We work hard to ensure our methodology is robust and up to date. The Attitude to Sustainability Questionnaire has been tested and validated using a ‘control’ group sample of the UK population. This was developed in partnership with national survey company YouGov, which collected responses from more than 2,000 people representative of the UK adult population. We also engaged specialist market research group Ignition House to conduct additional testing at the development stage.
On an ongoing basis, we assess average scores from the YouGov control group, along with the distribution of responses, against anonymised real-world data from our questionnaires to ensure the tests remain robust.
To make sure our questionnaires produce meaningful outputs, we have conducted rigorous testing to ensure questions are not complicated. We don’t use complex scenarios, and deliberately do not require users to make calculations or work with mathematical concepts such as percentages.
Instead, we present individual investors with a series of statements about the importance of sustainable investing and financial returns, and ask them how much they agree with each one. We seek to avoid vague questions or concepts with which most people would be unfamiliar.
Using these validation tests, our work with YouGov, and extensive client feedback, we have carefully designed and refined the questionnaire to ensure it remains relevant and understandable to all users.
For more information about how we review and assess the Attitude to Sustainability Questionnaire, please contact us.
We regularly test and validate our results using data from YouGov, the national survey company. YouGov surveys a ‘control’ group of 2,000 adults, representative of the UK population, to ensure our questionnaires are providing clear and useful results and that the questions remain relevant and understandable.
We have also tested our statement-based questionnaire with the help of Ignition House, a specialist investment industry market research group, which has helped us make additional improvements.
For more information about our testing, please contact us.
Yes – anyone who buys a licence from us can use the Attitude to Sustainability Questionnaire. It can be coded into your applications for use as needed. We can also help you develop web-based applications if necessary – just get in touch to find out how we can help you.
We have specifically designed the questionnaires to be easy to use for the broadest range of clients, so no prior investment or financial knowledge is necessary. We have minimised the use of financial jargon and we avoid complex investment questions or scenarios.
Instead, we focus on assessing broader aspects of an individual’s personality and perceptions to understand how they view saving and investing.
The output of the questionnaire is designed to be used alongside other work by financial advisers to understand their clients.
Advisers should use the questionnaire as one of several inputs when advising on portfolio construction and investment selection. You should also carefully consider a client’s need for risk – what they are trying to achieve and the investment return they need. Our sister company, A2Risk, offers tools to assess this, but many companies have their own cashflow modelling tools as well. You will also need to consider other circumstances unique to each client.
In short, the Attitude to Sustainability Questionnaire can be used as a robust and reliable starting point for discussions with clients about building a sustainable investment portfolio.
On occasion, a client may take issue with the output from the Attitude to Sustainability Questionnaire. It’s important to discuss this with them carefully to understand why they disagree, and to document these discussions carefully.
The outputs from the questionnaire are designed to be mapped onto sustainable investing definitions, such as the fund classifications set out by the European Union’s Sustainable Finance Disclosure Regulation and the Financial Conduct Authority’s proposed Sustainable Investment Labels in the UK.
It is essential that, whatever kind of profiling tool you decide to use, it is robust and compliant with regulatory requirements.
We have many years of experience in developing and testing our risk profiling tools through A2Risk to stay ahead of regulatory developments, and we constantly monitor updates in the sustainability space to ensure we do the same with at A2Sustainability.
While the sustainable investing regulatory landscape in the UK is still evolving, we strongly believe that advisers should have a robust, repeatable, and reportable way of assessing their clients’ attitudes towards sustainable investing.
The FCA believes this too. It has made it clear that understanding clients’ sustainability preferences is key to ensuring advice and product choice is suitable.
In an October 2022 consultation about sustainability disclosure requirements, the FCA stated: “We are exploring how to introduce rules for financial advisers aimed at confirming that they should take sustainability matters into account in their investment advice and understand investors’ preferences on sustainability to ensure their advice is suitable.”
To support this, we have made sure the outputs from our Attitude to Sustainability Questionnaire can be mapped onto the FCA’s proposed Sustainable Investment Labels for ‘green’ products, proposed in the same consultation paper. We will continue to monitor developments in this area and update our models as necessary.
Speak to us today for more information about how our Attitude to Sustainability Questionnaire can help your work in building appropriate investment solutions.
The outputs from our Attitude to Sustainability Questionnaire are designed to map directly onto the fund classifications set out in the EU’s Sustainable Finance Disclosure Regulation (SFDR).
As part of recent updates to MiFID II regulations, advisers and product providers are expected to ensure that the investment products they sell are appropriate for the audience they are targeting. The European Securities and Markets Authority (ESMA) set out its expectations on investment suitability in a September 2022 report, part of its efforts to align MiFID II with SFDR and other sustainability work across the EU.
The regulator is clear: “Firms will need to collect information from clients on their preferences in relation to the different types of sustainable investment products and to what extent they want to invest in these products.”
They must also “help clients understand the concept of sustainability preferences and explain the differences between products with and without sustainability features”, and then identify suitable products.
While the EU and ESMA continue to work on these rules and guidelines, we expect to see further developments on assessing suitability of ‘green’ investments. At A2Sustainability, we are monitoring developments closely to identify if any changes are needed to our models.
It is clear that advisers and product providers should be taking suitability seriously now.
Contact us for more information about suitability, and how our Attitude to Sustainability Questionnaire can help your organisation.