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BofA Puts Values-Based Investing in Focus

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As more Americans seek to match their investments with their core values and beliefs, Bank of America (BAC) said Tuesday that it was rolling out more products and services to let its clients do just that.

Over the next 10 years, BofA says it “will drive no less than $50 billion of business that consists primarily of lending, equipment finance, capital markets and advisory activity, carbon finance, and advice and investment solutions [into] areas including energy efficiency, renewable energy, transportation, water and waste, as well as $100 million in grants and program-related investments to nonprofit organizations, community development financial institutions and other NGOs promoting low-carbon and resource conservation solutions.”

This works follows the company’s original $20 billion commitment, which it notes was completed four years ahead of schedule at the end of 2012.

“One of the most pronounced trends we’ve seen in recent years is the call for wealth to have a productive impact on our environment, our communities, and our society broadly, in addition to earning an investment return,” said Andrew Sieg, managing director and head of Global Wealth and Retirement Solutions for Bank of America Merrill Lynch, in a press release. “This program offers opportunities for a wide range of investors with diverse interests and beliefs to help meet this need.”

Merrill Lynch, U.S. Trust

Merrill Lynch Wealth Management and U.S. Trust currently offer more than 180 investments to individual and institutional investors, including mutual funds, ETFs, separately managed accounts and alternative investments that emphasize environmental, social and governance (ESG) issues, BofA says.

And it’s no wonder, given investor demand.

Values-based investing accounted for $3.74 trillion, or roughly one in every eight to nine dollars under professional management, says Chris Wolfe, chief investment officer of Merrill Lynch Wealth Management’s Private Banking and Investment Group, citing a 2012 study from the Forum for Sustainable and Responsible Investment.

This represents a 22% jump for the $3.1 trillion of values-based investments the group noted in its 2010 report. “There is compelling evidence that investing according to one’s principles can generate competitive returns,” he explained in a statement.

In early 2013, U.S. Trust launched a new set of investment screens, called Environmental Stewardship and Sustainability (E2S), led by portfolio manager Jason Baron.

E2S came on the heels of U.S. Trust’s Socially Innovative Investing (S2I) program, also managed by Baron. S2I investment screens have been used by clients to direct some $600 million in assets.

“In creating this strategy, we responded directly to client demand,” said Chris Hyzy, U.S. Trust’s chief investment officer, in a press release. “We believe that corporations dealing effectively with environmental issues are poised to do well relative to their industry peers.”

Merrill Edge, SRI

Clients in BofA’s mass-affluent platform, Merrill Edge, can now access a new landing page for the values-based products and services. Self-directed clients will find socially responsible investing (or SRI) options in the platform’s mutual fund and ETF screens.

In addition, Merrill Lynch Wealth Management now offers clients a free SRI proxy voting service for some accounts.

Earlier this year, Bank of America (BAC) rolled out the Merrill Edge Roadmap, a financial- planning tool for its 1.6 million mass-affluent Merrill Edge clients. As of June, it has some 1,800 Merrill Edge “financial solutions advisors,” about 1,000 of whom are located in BofA branch offices.

As of June 30, BofA’s global wealth operations included 16,989 advisors vs. 17,293 in the prior quarter and 18,060 last year, while the total headcount for client-facing financial professionals was 19,689 in Q2’13 vs. 20,018 in the prior quarter and 20,844 a year ago.

US Trust has 2,084 reps, while Merrill Lynch includes 15,759.

Net AUM flows for BofA’s wealth unit in Q2’13 were $7 billion in the second quarter, down from $18 billion in the prior quarter, but up from $3.7 billion a year ago. For the first six months of 2013, total flows stood at $25 billion vs. $11.4 for the same period in 2012.

Client balances, or assets under administration, rose 8% (excluding certain balance transfers) from the year-ago quarter to $2.22 trillion, “reflecting higher market levels and net inflows, driven by client activity in long-term AUM, deposits and loans,” according to the bank; client balances in Merrill Lynch accounts were $1.8 billion. Total assets under management rose $76.2 billion, or 11%, year over year to $743.6 billion.

Earlier this month, the Securities and Exchange Commission charged Bank of America and two subsidiaries with defrauding investors who bought residential mortgage-backed securities (RMBS) by failing to disclose key risks and misrepresenting facts about the underlying mortgages.

In addition, the Department of Justice said recently that it would take parallel civil action against BofA for violations of the Financial Institutions Reform, Recovery and Enforcement Act of 1989 involving $850 million of RMBS sales in 2008, which have resulted in estimated losses of roughly $120 million.

The SEC and DOJ charges do not affect BofA’s wealth management operations, according to Bank of America; they relate to institutional investors.  


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