Science behind Ethical Values test

At Psychometrica, our objective was to develop a psychometric questionnaire that would reflect the societal goals that our users really care about – we call them ethical values. We decided to tackle this challenge alongside our partner, Ethical Capital.

Over the course of our research, we concluded that The UN 17 Sustainable Development Goals would form a solid basis for our framework. They have already proved to be a useful tool as a force in guiding policy makers and social impact investors.

However, we noticed that in order to reflect the values of the majority of people, they had to be slightly adjusted. We found that while the UN Sustainable Development Goals (or SDGs as they’re commonly known) are generally well aligned with the values of the wider population, there are a few important differences.

So we decided to modify the UN’s SDG framework and came up with Ethical Capital’s proprietary “Ethical Value Framework”, which was developed in collaboration with Psychometrica and consists of 16 goals or values rather than 17.

Here, we explain how they are different to the SDG framework.

Global leaders and policymakers created 17 development goals to address global challenges such as poverty, gender equality, and climate change.

The SDGs framework was launched at the United Nations Conference on Sustainable Development in Rio de Janeiro in 2012.

The SDGs replaced the Millennium Development Goals (MDGs), which started a global effort to combat poverty back in year 2000. The MDGs established measurable, universally-agreed objectives for tackling extreme poverty and hunger, preventing deadly diseases, and expanding primary education to all children, among other development priorities. The new UN SDGs go much further than that.

The goals are as follows:

Goal 1: End poverty in all its forms everywhere
Goal 2: End hunger, achieve food security and improved nutrition, and promote sustainable agriculture
Goal 3: Ensure healthy lives and promote well-being for all at all ages
Goal 4: Ensure inclusive and equitable quality education and promote lifelong learning opportunities for all
Goal 5: Achieve gender equality and empower all women
Goal 6: Ensure availability and sustainable management of water and sanitation for all
Goal 7: Ensure access to affordable, reliable, sustainable and modern energy for all
Goal 8: Promote sustained, inclusive, sustainable economic growth, full productive employment and decent work for all
Goal 9: Build a resilient infrastructure, promote inclusive sustainable industrialization, and foster innovation
Goal 10: Reduce inequality within and among countries
Goal 11: Make cities and human settlements inclusive, safe, resilient, and sustainable
Goal 12: Ensure sustainable consumption and production patterns
Goal 13: Take urgent action to combat climate change
Goal 14: Conserve and sustainably use the oceans, seas and marine resources for sustainable development
Goal 15: Protect, restore, and promote sustainable use of terrestrial ecosystems, sustainably managed forests, combat desertification, halt and reverse land degradation, and halt biodiversity loss
Goal 16: Promote peaceful, inclusive societies for sustainable development, provide access to justice for all, build effective, accountable, and inclusive institutions at all levels
Goal 17: Strengthen the means of implementation and revitalize the global partnership for sustainable development

We set out to develop the new ethical values framework alongside our partner Ethical Capital, a platform for impact investments. We planned for our values to mirror those of impact investors and have drawn up a 16-goal version of the UN SDGs, which we’ve called the Ethical Value Framework.

Given that the UN SDGs are already well-established and cover most investor goals, it made sense to use them as the basis for our framework. In fact, for the most part, our framework is identical to the UN SDGs.

That said, some of the SDGs do not completely align with the values of impact investors and the wider population, so we felt that we should modify them accordingly.

In order to derive the list of 16 values of the Ethical Value Framework, we asked impact investors to pinpoint the most important goals out of a list of 40. The list of goals included all the UN Sustainable Development goals and all the UN Millennium Goals along with several other goals that we know people care about.

After analyzing the survey results, we found that the UN SDGs are generally a true representation of the values of investors – albeit with some important differences.

When we understand how the UN SDGs were developed, we see why they don’t necessarily reflect what is important to most individuals in several ways.

The goals were created as a compromise within the United Nations, an organisation that assembles representatives from over 190 countries! These politicians hold vastly different values due to cultural and religious reasons, which means that the UN SDGs could never truly reflect the values of impact investors and our users.

One example is that a large number of UN member countries do not believe in equal rights for the LGBT community. Also, many countries still suppress minorities. Therefore, LGBT and minority rights could not be included in the UN SDGs, even though they’re hugely important to consider when determining ethical compatibility.

It’s also important to remember that state representatives, especially in the case of developing countries, mostly care about economic development with the prospect of receiving maximum development funding.

In order not to have this endangered by other goals like for example climate change, many of the UN SDGs are directed at economic development, even though this is not a major priority to ethical investors and the population at large.

As we said, the Ethical Value Framework is very similar to the UN SDG goals, but there are some important differences.

As we can see above, most goals in the Ethical Values Framework and the UN Sustainable Goals are the same:

• Poverty
• Hunger
• Health and Wellbeing
• Education
• Gender Equality
• Clean Water
• Reduced Inequalities
• Climate Action
• Life below Water
• Life on Land
• Peace, Institutions, Justice

These goals are goals that are not only seen as important by UN member nations, but also by impact investors and the wider population.

As we can see above, there are several SDGs that the Ethical Value framework does not include:

• Affordable Energy
• Economic Growth
• Industry and Infrastructure
• Sustainable Cities
• Responsible Consumption and Production
• Partnerships

These goals were agreed by UN member nations as important. However, the impact investors that we surveyed did not seem to value them as much hence why they’re not included in the Ethical Value Framework.

There are five goals within the Ethical Value Framework that are not included in the UN Sustainable Development Goals.

• Animal Welfare
• LGBT Rights
• Diversity Rights
• Freedom and Democracy
• Science and Technology

We have specific reasons for deciding not to include certain SDGs within the Ethical Value Framework.

Goal 8 of the UN SDGs is to “Promote sustained, inclusive and sustainable economic growth, full and productive employment and decent work for all”. However, the Ethical Value Framework does not include economic growth as a separate goal.

There are several reasons for the exclusion of goal 8. First, economic growth is a means goal, not an end goal; it is a means to reduce poverty worldwide. However, we already have “No Poverty” as a main goal of the SDGs, so we believe there is no need to also include economic growth.

The argument that growth goes hand in hand with poverty eradication is weak, especially looking at development over the last three decades. Of all the wealth produced by growth since 1990, the poorer 60% of the world population only received a pitiful 5% of it. That’s over half of all humanity. The people who need the fruits of economic development the most got such a tiny sliver that it’s close to nothing. Growth is a very inefficient way of helping the poor out of poverty because the vast majority of the wealth goes to the rich, a smaller slice goes to the middle class, and only the crumbs are left for the poor.

Furthermore, economic growth generally leads to increased pollution and CO2 emissions. That’s why the only times global emissions have decreased were during the 2008 global recession and at the height of the COVID-19 pandemic in 2020.

Finally, Goal 8 gives regressive companies and countries a loophole where they can say “We’re working on the SDGs!” when all they’re doing is focusing on earning money, even if that is contrary to the other goals.

Goal 9 of the UN SDGs is to “Build a resilient infrastructure, promote inclusive and sustainable industrialisation and foster innovation”. However, the Ethical Value Framework does not not include “industry and infrastructure” as a separate goal.

There are several reasons for the exclusion of goal 9. First, industry and infrastructure is another means goal, as is economic growth.

Also, as economic growth, increased industry, and an improved infrastructure can often lead to more profit for corporations and more money for the rich, they do little to improve conditions for the very poor.

Finally, according to our survey, while impact investors do want to alleviate poverty, ensure everyone has clean water, enough to eat, basic education, basic health care, etc., factors such as economic growth, industry, and infrastructure are not the types of social goals that impact investors are keen to promote.

Goal 11 of the UN SDGs is to “Make cities and human settlements inclusive, safe, resilient, and sustainable.” However, the Ethical Value Framework does not include “sustainable cities” as a separate goal.

There are several reasons for this. First, the “Sustainable Cities and Communities” goal aims to improve human conditions in cities and create a greener city. Both of these objectives are already underlying in other SDGs.

Also, it seems that like goal 8 (Decent work and Economic Growth) and goal 9 (Industry, Innovation and Infrastructure), sustainable cities are a goal to classify economic activity that doesn’t have any other social objective. In particular, it can serve as a means to obtain funding for large infrastructure projects in cities, which is a goal of governments, but is not something that most impact investors care about.

Goal 12 of the UN SDGs is to “Ensure sustainable consumption and production patterns”. However, the Ethical Value Framework does not include “sustainable consumption and production” as a separate goal.

This is once again a means goal: In order to achieve the core Sustainability Goals it is helpful if both production and consumption are sustainable. However there is no need to explicitly prescribe how this sustainability is achieved.

Furthermore, the goal could be interpreted as saying that more “consumption and production” by itself is the goal, which could be a justification for acting against other SDGs.

Goal 7 of the UN SDGs is to “Ensure access to affordable, reliable, sustainable and modern energy for all”. However, the Ethical Value Framework does not include “sustainable consumption and production” as a separate goal.

The impact investors we surveyed think that one of our best ways to reduce CO2 emissions and attempt to minimise climate change is to tax CO2 or “cap and trade” it, which makes energy more expensive. Therefore, affordable energy is opposed to action on climate. It is understandable why governments include this as it provides justification to not take measures on climate action as these could contravene the affordable energy goal.

At Psychometrica, we believe that everyone should have access to energy for essential requirements such as refrigeration, mobility, and so on, and so do the investors who we surveyed. However, we believe this should be addressed via the goals of reducing inequality and poverty, not by attempting to reduce energy prices, and therefore endanger the climate.

Here we explain why the Ethical Value Framework needs additional values or goals that aren’t included in the UN SDGs.

The goal of “Animal Welfare” goes beyond the UN SDGs’ “Life Below Water” and “Life on Land”. These two SDGs are focused on the effect of life, including animals, on humans. For example sustainable fishing has the purpose of ensuring that there are enough fish in the future for humans to extract. So the SDGs are in fact concerned with human welfare, not animal welfare.

However, Impact Investors not only care about the welfare of humans but also the welfare of animals. While the UN SDGs don’t reflect this, we’ve included the goal of “Animal Welfare”.

The goal of “Science and Technology” takes account of the fact that through science and technology, the human condition can be improved, climate change reduced, and the environment become less polluted.

This is similar to “Industry, Innovation, and Infrastructure” and “Sustainable Cities and Communities”. However, “Science and Technology” is specifically aimed at the advancement of knowledge, while the other two are more general and too broad.

For example, building new streets for cars and new coal plants with old technology could be seen as advancing goal 9 of “Industry Innovation and Infrastructure”, however, it would only serve to make the climate situation worse. We’re not saying that no additional streets or coal plants should be built, but we are saying that activities that do not advance science and technology are not goals that impact investors care about.

In our survey of impact investors, we found that equality and diversity, and in particular gender equality and the rights of the LGBT community and minorities, are seen as important. In fact, within the ESG score, which is used as an alternative or addition to the UN SDGs, LGBT rights and minority rights are an important part of the “S-part”, or the “social part”.

However, only gender equality is included in the SDGs, with no mention of LGBT or minority rights. This is understandable, as many UN member countries in fact don’t bestow equal rights to minorities or the LGBT community. Therefore, clearly these member countries would not have accepted LGBT or Minority empowerment as a UN SDG.

However, based on the ethical values of the impact investor community, we see the need to include both as Ethical Values.

Finally, the Ethical Value Framework also recognises individual freedom and democracy as a goal, as the impact investor community expressed their appreciation of those values.

We noted that the UN member nations didn’t include it in the UN SDGs, although this isn’t surprising as many member nations are themselves in conflict with this goal.

UN SDGs serve to empower economic development, but they’re not made for empowering the population against the government.

Impact investors’ goal is to make the world a better place, and freedom and democracy are seen as an important part of this by most of them.

The UN SDGs are composed of 17 goals, that is, 9 more than the Millennium Development Goals. There are so many different goals that it is hard, even for people who work with them on a daily basis, to remember them all.

You can test this by yourself: How many goals can you remember right now? Even after reading detailed descriptions of the 17 goals, you probably can’t remember all of them.

At the same time, many goals are trying to achieve common core objectives. For example, climate change, life on earth, and life under water are all attempting to achieve a greener planet. Education, healthcare, poverty, and hunger are all trying to improve the human condition.

Therefore, it is possible to divide the sustainable development goals into 4 major categories:

• Planet
• Human Condition
• Equality and Diversity
• Human Rights

The Planet category includes any goal or value that is related to nature, climate, and animals. These are:

• Life on land
• Life under water
• Animal welfare
• Climate action

The Human Condition category includes any goal or value that is related to improving the life of humans generally by fighting poverty or facilitating means for people to improve their life. These are:

• Poverty
• Hunger
• Clean water
• Education
• Health
• Science

The Equality & Diversity category includes any goal or value that is related to promoting people who are being discriminated against or are under-represented. These are:

• Women’s rights
• Economic equality
• LGBT rights
• Minority rights and diversity

The Human Rights category includes any goal or value that is related to individual rights, freedom, democracy and rule of law. These are:

• Freedom
• Rule of Law & Order

The Ethical Value categories are color coded to make them more understandable and memorable. We use the following colors:

• Planet = Green
• Human condition = Blue
• Equality and Diversity = Red
• Human Rights = Yellow

The total list of 16 values can thus be visualized by the following ethical values quadrant: