The psychology of ESG and sustainability investing
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The psychology of ESG and sustainability investing

While the need for different ways of thinking and investing in order to safeguard our climate, nature & societies is evident, attempting to drive change while we are informed by the same states of mind that have been predominant in the past will lead to insufficient incremental advances

Summary: How do you (and your clients) manage the often conflicting emotions that derive from making decisions related to sustainability and investing? We discuss three psychological challenges that are helpful to know about when advising on ESG and sustainability investing: The Riverbed Effect, Comfort Blankets and The lions in the Mind.

Why this is important: Attempting to drive change while we are informed by the states of mind that have been predominant in the past will lead to misguided action, confusion and frustration. On the flipside- by better understanding our drivers and emotions we can learn how to recalibrate our mindsets to make more effective decisions, build trusted partnerships with clients and drive the sustainable changes necessary for our collective futures.

The big theme: The thing with sustainability transitions is that whilst there is a starting point, there is no end point. The world is a continually changing place and we are continually transitioning. It's a series of steps. The transition is by definition about enabling change and that means engaging with people. We see this as one of the key underdeveloped areas in sustainable investing.

The details

Why clients struggle to make decisions and how you can help

One of the biggest real-world challenges for everyone involved with sustainability and finance/investing is managing the complex emotions involved. The group most on the front line in this are the advisers. Many are unsure how to engage with clients’ worries, suspicions or resistance to ESG and sustainable investments. They want to make the debate understandable but can struggle with over simplifying often complex issues. And it can be hard to silence the siren voices that promise easy and painless solutions. Plus, adding sustainability into the mix is difficult in a world that has historically focused on risk, reward and diversification. While being informed is important, the answer is not just more facts. We all need to help our clients adopt a new mindset, as well as evolve our own.

Ffiona’s specialisation is in applying psychology to accelerate sustainability transitions. She has a particular interest in how we process and absorb ESG and sustainability issues. Her work tends to involve helping leadership teams define and align on their strategy, strengthening board and team effectiveness or ensuring organisations have the right skills and mindset in place to achieve their sustainability plans.​

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