The custodians and trading platforms are getting the ask from advisors and don’t have the solutions yet. SMART Portfolios is one solution but won’t be the right fit for everyone. Advisors can take our solution or others to trading platforms for product and pricing reviews as a starting point.
Doing the research is hard. You have to speak with every manager about their methodology and ESG analytics partners and process. An advisor who doesn’t do that runs the risk of presenting portfolios to clients that don’t meet their criteria, which makes the advisor look ignorant at best and perhaps negligent in their diligence process.
We provide SMART Portfolios advisor partners with our methodology, diligence and screening processes. Currently in some economic sectors pure ESG choices are impossible to provide, but we’re pushing for better metrics all the time.
Ellis: You’ve mentioned ongoing dialogues with asset managers. Do you provide this and other client-facing services for advisors who use your ESG research?
Gitterman: Yes, we can help you prepare effectively for client meetings and be a resource for client calls and conversations until the advisor develops a comfort level for himself or herself.
The more assets we manage in these portfolios, the more portfolios like them will come to market. The more we demonstrate that the better ESG funds are getting the assets, the more asset managers will eliminate the green washing that exists.
We can be an effective voice for advisors with the investment companies, which is part of our mission. Asset managers can’t just slap an ESG label on a fund and expect advisors to accept that at face value.
We’re trying to be clear with advisors about presenting ESG products and asset managers about providing full disclosure on the metrics being used in product construction. The sooner we can get rid of the green washing the sooner everyone will know where they stand.
Ellis: Some ESG issues are in the news almost daily. The first is the divest/invest dialogue. What are your thoughts on this.
Gitterman: The problem with divest right now is getting enough scale to have any impact on company policies related to ESG issues. Maybe one day we will achieve that scale, but right now most of us use fossil fuels as consumers, for example, even if we’re not investing in those companies. What’s important now is to be conscious of how we’re using fossil fuels and to pressure companies related to product efficiencies, environmental and social impact.