Speaking to Purchasers About ESG Investing

Over the previous 10 years, environmental, social, and governance (ESG) investing has advanced from a distinct segment model to a mainstream funding possibility. Demand from buyers is widespread, notably amongst ladies and millennials. These cohorts are likely to view ESG investing as a approach of expressing their values and making a constructive impression on the world. On account of the curiosity, the funding area has seen a proliferation of sustainable funding merchandise, notably from traditionally conventional managers. In 2020, sustainable fund flows reached an all-time excessive of $51.1 billion, in accordance with Morningstar.*

Regardless of garnering record-breaking flows, solely 21 p.c of economic advisors are proactive in initiating ESG discussions with purchasers, and solely 32 p.c of advisors use ESG to draw new purchasers, in accordance with InvestmentNews. Don’t miss this precious alternative to distinguish your companies from these of different advisors and proceed exceeding your purchasers’ expectations by introducing ESG. If you happen to’re not speaking to purchasers about ESG investing, you might be lacking out on an efficient method to meet their wants and retain their enterprise. Under, my colleague Sarah Hargreaves and I have a look at the efficiency of sustainable investing merchandise and lay out a plan for broaching this subject together with your purchasers.

The Case for Aggressive Efficiency

Some skeptics would possibly dismiss ESG investing, believing that incorporating its requirements and rules would result in underperformance in contrast with conventional funding methods. However, latest information suggests in any other case. As proven in Figures 1, 2, and three, ESG indices outperformed their conventional counterparts throughout numerous areas and time frames—whatever the nation of domicile. Based mostly on these wide-ranging efficiency comparisons, it’s clear that ESG investing gives a aggressive efficiency alternative.


Knowledge as of three/31/2021.

A Plan for Speaking to Purchasers About ESG Investing

How will you get comfy steering a consumer dialogue towards sustainable investing? The very best practices outlined beneath present a great way to get began.

Get educated. Improve your understanding of sustainable investing and the out there approaches earlier than introducing this idea to your purchasers. Take a look at the academic sources supplied by the Heart for Sustainable Funding Schooling or Ideas for Accountable Funding to get began. When you verify the basics of the area, you’ll be higher ready to debate ESG investing together with your purchasers.

Provoke a dialog. Be proactive and ask your purchasers if they’ve heard of ESG investing or if they’ve an curiosity in studying extra about this investing method. Not solely is that this a good way to gauge your consumer’s curiosity, nevertheless it additionally means that you can have interaction together with your purchasers on their monetary targets and priorities.

Follow the fundamentals. When framing some great benefits of sustainable investing, it’s finest to maintain it easy. By utilizing an ESG framework, buyers can achieve a extra holistic understanding of how an organization operates. You can too point out how leveraging ESG elements will help mitigate dangers by figuring out high-quality corporations with sustainable enterprise fashions—key drivers of long-term outperformance.

Maintain it private. Go the additional mile and tailor the dialog to the problems your purchasers care about most. You possibly can even present related examples or information to additional set the stage. Both approach, personalizing the message will make it easier to successfully attain your purchasers.

Be ready for questions. Some purchasers might have little publicity to this area, and others might know bits and items, so be able to reply their questions. Some might surprise tips on how to incorporate ESG into an current monetary plan, and others could also be involved with efficiency.

A Dedication to Your Purchasers’ Evolving Wants

As evidenced by the latest proliferation in consumer curiosity and asset flows, there’s no time like the current to decide to speaking to purchasers about ESG investing. Whereas there is no such thing as a uniform method to incorporating ESG methods into consumer portfolios, proactively initiating a dialog will make it easier to deal with your purchasers’ funding wants, whereas gauging their curiosity within the sustainable investing area. As investor preferences proceed to evolve, being ready to current all out there funding choices will make it easier to display your ongoing experience and devoted monetary stewardship.

*Supply: Morningstar, “Sustainable Fairness Funds Outperform Conventional Friends in 2020,”
January 2021.