Advisors Stand In Way Of ESG Investing

When it comes to impact investing, advisors often say their clients do not ask for it.

But many clients do not know enough to ask about the possibilities of ESG investing, according to Marlo Stil, managing partner and financial advisor at the Wealth Consulting Group in Nevada.

When clients learn they can invest in a way that promotes their personal goals, “78 percent want to know more,” Stil said during a discussion of environmental, social and governance (ESG) investing at the Invest In Women conference, which is being sponsored by Financial Advisor and Private Wealth magazines and held in Houston.

“Advisors are the obstacle” to promoting ESG investing, added Jeff Gitterman, co-founder of Gitterman Wealth Management, which specializes in ESG investing. When clients learn of the possibilities, there is enormous interest on their part, and the products are available, but advisors block the path between the two, he said.

“I think women advisors will break that logjam,” Gitterman said. Studies have shown women and millennials are more interested than those in other demographics in ESG investing.

Stil said after she broaches the subject with her clients, they are often prompted to tell their own story about wanting to avoid certain investments or hoping to help a certain cause. “I then expand on that interest,” she said.

Clients have an interest in a wide range of issues. “Most retail clients want to help solve as many problems in the world as they can. If you help them do that and they leave your office feeling better about themselves and the world, you have made a huge impact on them,” she added.

Gitterman said his firm decided years ago to start putting their money where their mouths were and actively address ESG issues. “We ‘skinnied down’ our fund managers to those who really cared about these issues,” he said.

Interest in ESG investing has been growing consistently, but it got an extra boost after the 2016 presidential election because of the perceived indifference of the Trump administration to environmental and social issues, he noted. This is particularly true among Gitterman’s target clients of college professors. “You can vote with your money,” he said.

Stil described ESG investing as “capitalism at its finest.” There are many companies that, while not perfect on ESG issues, are open to making the changes that investors demand, she said. “Business leadership realizes it is not only the good thing to do, but the smart business thing to do.”