There’s no doubt that interest in ESG, impact and sustainable investing is growing. But while many institutional investors have embraced those assets, managing almost $23 trillion of them globally, the majority of financial advisors have not.
“Advisors have been lagging,” says Jeff Gitterman, founder of Gitterman Wealth Management, which has offices in New York City and northern New Jersey.
He says that 2018 could be the year that advisors begin to embrace environmental, social and governance focused investing because an increasing number of clients are demanding it. “You can’t have all that client demand and so little advisor distribution,” says Gitterman. Those advisors that aren’t offering ESG opportunities “will lose clients.”
(Related: Clients Clamoring for ESG Investing Advice)
At minimum they probably won’t attract as much next-generation millennial money or as many new female clients as they could since those populations are reportedly the biggest fans of ESG assets in the retail market.
Clients interested in ESG investing are “probably the fastest growing” segment among new clients at Capital Intelligence Associates, says Mitchell Kraus, a principal and co-founder of the Santa Monica, California-based multigenerational wealth management firm. “We find that female and younger clients tend to want ESG investments more than older males but there is no [ESG client] ‘type,’” says Kraus.
Kraus asks every client about ESG investing as part of his conversations about their goals and objectives. In the past he would discuss ESG investing only after a client brought it up.
Erika Karp, founder of Cornerstone Capital Group, a New York-based firm that specializes in sustainable investing, says many advisors are not embracing sustainable investments because of fears of the unknown and concerns about forfeiting returns.
“There needs to be a lot of education” and debunking of “the myth of underperforming,” says Karp. “The data is showing the opposite.”