Sustainable finance & consumer protection

When surveyed about 2/3 of citizens say they want to invest sustainably, and 40-50% say they want to have a measurable impact in the real economy through their investments and savings, climate mitigation being one of the top priorities. 

The first behavioural finance field experiments conducted by the University of Maastricht suggest that end-users walk the talk when they have the possibility to do so. However, another experiment conducted by the University of Zurich suggests that individuals optimize the warm glow associated with their investment decisions rather than their actual impact as investors. 

Many other barriers appear when individuals have to combine financial objectives (returns, risk, etc.) with environmental objectives:  

• The low level of literacy of the average citizen on both financial aspects and sustainable finance create a major obstacle when it comes to forming an opinion about their preferences, and for financial advisors to ask questions about the matter. 
• On the product side, the offer appear not to match retail investors preferences and most environmental impact claims made by fund managers could be categorised as misleading.  

As a result, "individual impact investors" constitute a 'silenced' majority. In Europe, preliminary evidence suggests that at least 75 million people might be currently invested in financial products that are considered ‘unsuitable’ by the existing regulation. 

Addressing this problem will require progress on impact measurement, behavioural finance, fintech innovation and further changes in regulatory framework.