“Even as regulations ease, the implications of unsustainable business practices, of poor social stewardship and flawed corporate governance are still there,” says St. Amand. “These companies are still operating in communities, and communities are still free to impose penalties on polluters and poor actors. There are still financial implications for poor ESG performance.”
Take Volkswagen, which in April 2015 admitted that it had cheated emissions tests for its lineup of diesel vehicles. As a result, the company’s shares lost 60 percent of their value over the next several months.
According to Morningstar, ESG funds were a lone bright spot in the active mutual fund landscape. While $127 billion flowed out of active equity mutual funds in 2016, $3 billion flowed into funds with some sort of ESG mandate.
“I don’t see Trump as having an impact on the investing trend,” says Webster from OWLshares. “The previous administration wasn’t leading demand, they were following demand. The public zeitgeist has been brewing for years towards a more sustainable, socially responsible sentiment, and one administration isn’t going to change that.”
The financial industry’s zeal for environmental sustainability might shock some environmentally minded investors. In February, a collection of asset managers accounting for more than $2.8 trillion in assets under management called for all developed economies to phase out subsidies for fossil fuel companies.
In March, BlackRock announced that it will start to become more involved in pressuring corporate boards to address climate change, diversity and labor practices. Later in March, State Street introduced tools allowing asset managers and institutions to evaluate their holdings for ESG-related risks.
Offering advice and investment recommendations with an ESG tilt may help attract clients driven by their own sense of social responsibility, and could help keep existing clients invested during Trump’s presidential tenure.
Despite the recent flurries of ESG activity, the financial industry and investment community are neophytes to the ESG universe, says Zerilli.
“Most advisors, and many investors, are still in learning mode on ESG,” says Zerilli from John Hancock. “Quite a few people are still asking what they will have to give up in terms of financial performance to invest in this way, which shows that there’s still a long way to go in educating the public about ESG.”