The National Association of Personal Financial Advisors on Monday published several tips for consumers who want to become socially responsible investors, but worry about the financial tradeoff from such investments.
Sustainable, responsible and impact investing is growing by leaps and bounds. From 2014 to 2016, the sector grew by more than a third to nearly $9 trillion, according to the Forum for Sustainable and Responsible Investment Foundation (US SIF).
“With a wide range of investment options and ever-changing definitions of industry terms, this space can be confusing for consumers,” NAPFA’s chief executive Geoffrey Brown said in a statement.
“These tips from NAPFA advisors offer guidance for anyone interested in becoming a socially responsible investor.”
Financial advisors can play a major role in allaying impact investors’ concerns and helping them make informed investment decisions. First, however, they have to figure out how they want to position their firms for clients who wish to engage in impact investing, according to Danielle Seurkamp, a Cincinnati-based certified financial planner.
“Someone who simply wants to swap out a fund or two to satisfy a specific client’s wishes is going to approach this in a very different way than someone who wants to make sustainable or socially responsible investing a core part of their business,” Seurkamp told ThinkAdvisor.
An advisor focused on a specific client can use a tool such as Morningstar’s sustainability score to evaluate a fund’s sensitivity to environmental, social and governance practices, she said.