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Portfolio > Portfolio Construction > ESG

ESG Investments Perform Just Fine, Says Aaron Wealth Founder

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Gary Hirschberg left Goldman Sachs in May 2018, after roughly 12 years, to launch Chicago-based RIA Aaron Wealth, which after a little less than a year has $600 million in assets under advisement.

“The independent space was starting to be more attractive to me,” he told ThinkAdvisor. He also wanted to take the firm a certain direction, one focused on environmental, social and, especially, governance investing. He says a smaller percentage of the firm’s accounts are 100% ESG invested, but Aaron Wealth is directing clients that way “because we believe it is the right move for them for a better return.”

This week the firm announced the creation of its Impact Advisory Board, which was Hirschberg’s way to bring together “like-minded people” from various backgrounds to get their views on impact investments that affect their clients, society and the planet.

“We needed to have a sounding board of folks who were interested in this space. Kind of like a hybrid nonprofit board,” he said. “These people truly have an avid interest one way or the other in sustainability and socially responsible investing.”

The “inaugural” board, to which Hirschberg says he’ll add people, is made up of himself and Bill Andrakakos, director of investments of Aaron Wealth, as well as Doug Scott, CEO of Ethic; Kimberly Venable, business development at Addepar; Jennifer Rhodes, partner at Ice Miller; Todd Thomson, chairman and co-founder of Dynasty Financial Partners; Nick Gerace, senior VP of investments of Dynasty, and the Rev. Joseph L. Morrow, pastor at Fourth Presbyterian Church of Chicago.

The diversity of the group speaks to their mission, whose first board meeting is in early August, and all have worked in SRI “in their various worlds,” Hirschberg says.

For example, Venable of Addepar, a technology company that offers an integrated financial software platform, is a Goldman alum who used to work for Sorenson Impact Center, one of the largest family offices in the United States that focuses almost exclusively on sustainable investing. Morrow sat on the Presbyterian Church’s national impact investing committee, as well as has the added connection of being Hirschberg’s college roommate while they were at Georgetown University.

Informal meetings this group already has had, Hirschberg says, were “amazing to watch them interact and have conversations and debates about what’s impact and what’s not. What kind of trends they are seeing and what kind of funds and kinds of investment opportunities they see … this group will be really good in [determining whether] a particular investment should or shouldn’t go on our platform, not from an investment perspective, but an impact perspective.”

The idea that sustainable portfolios don’t perform at the level of broader market portfolios is an “old wives’ tale,” Hirschberg says. “It’s a big myth that in order to do good you have to give up return,” he says. “The reality is the last couple years most index funds — depending on what ESG lens you look at — have actually outperformed the broader market.”

He adds that the growth of ESG — the Global Sustainable Investment Alliance estimates the amount of money invested in impact globally is close to $31 trillion — changes performance numbers from when there were far fewer options 15 years ago. Today, he says, studies show that the worst impact investing returns are even with S&P 500 performance.

Hirschberg agrees that there are some groups out there that just use the term “green” or “ESG” for marketing, “but that’s not what we’re talking about [at Aaron Wealth],” he says. “That’s not the movement that is happening. Rather [we] believe that sustainable investing will become the norm, not the exception, because [those funds] will have better returns [because] better run companies will outperform.”

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