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November 25, 2019 at 09:00 AM
Socially responsible investing is hard to overlook these days. There is roughly $12 trillion — or one out of every $4 of professionally managed assets in the U.S.— invested in line with sustainable, responsible and impact strategies, and the practice continues to gain market share globally.
Companies increasingly tout their environmental and social practices on earnings calls, appealing to growing interest in such information. Environmental, social and governance factors continue to move up the list of investor priorities.
This is all for good reason. Aside from being morally compelling, sustainable investing is increasingly seen as “full-information investing.” The burgeoning availability and sophistication of ESG data equips investors with new ways to assess corporate behavior and subsequently, risk. For investment advisors, it also presents a tremendous opportunity to differentiate and modernize their firms.
Still, many advisors meet a roadblock when it comes to bridging the gap between idea and implementation. This is perhaps not surprising — just as index investing stumped advisors in the mid-1970s before it emerged as a dominant investment strategy, sustainable investing may take time to achieve mass adoption. We think sustainable investing is largely an untapped opportunity, and for those advisors who want to translate interest into adoption, it may be a matter of making a few simple changes.
• Personalize the introduction: While there’s a good chance clients are familiar with the concept behind sustainable investing, the way an advisor raises the discussion has direct consequences on a client’s receptivity. Is your client especially risk averse? Perhaps you introduce sustainable investing as a tool for risk mitigation, pointing to the material consequences of poor governance in instances such as Uber or Boeing. Is your client especially interested in causes such as gender equity or climate change? Investing with a gender or climate lens is an opportunity to align one’s financial story with his or her personal interests. Sustainable investing is a big topic; the more personal you make it, the more sense it can make to clients.
