New Tool Boosts the Quality of Sustainable Financial Advice

The ZHAW School of Management and Law developed the digital tool on behalf of the Federal Office for the Environment (FOEN). This means that sustainability is not assessed in isolation, but together with traditional investment criteria such as risk, return, and fees. The focus is on a digitally supported preference query tool that simulates real-life decision-making situations. Instead of asking abstract questions about sustainability, users repeatedly make specific investment decisions between investment products with different risk, return, fee, and sustainability characteristics.

A key problem with existing practical tools is that they cannot ascertain sustainability preferences independently of financial characteristics, according to ZHAW sustainable finance experts Julia Meyer and Michaela Tanner. The new tool integrates sustainability preferences with traditional investment characteristics, making it clear what compromises investors are prepared to make. According to the ZHAW experts, this approach reduces distortions, such as social desirability bias and the influence of advisors, and realistically depicts decision-making situations. 

Tests of the new tool and intensive discussions with financial experts and investors indicate that the integrated multiple-preference query can help investors recognize their own sustainability preferences during the decision-making process. “This finding is highly relevant when giving or receiving financial advice,” say the two researchers. Through a structured, quantitative survey and the differentiation of various sustainability characteristics, the tool supports higher-quality consultation, a better fit between customer expectations and investment products, and a reduced risk of incorrect advice and greenwashing. The tool is publicly accessible and can be evaluated by individuals as well as integrated into financial institutions’ advisory processes in the future.