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Exploring Sustainable Investing: Aligning Clients’ Wealth with Their Values

Victor Orozco, CSRIC® July 6, 2023

Sustainable assets under management amounted to $8.4 trillion in 2022, according to the US SIF Foundation. Right now the sustainable investing space is being attacked and some asset managers are backpedaling out, which actually has brought about more awareness and gives the opportunity for education.

I believe there’s a big need for advisors to gain this knowledge. More clients want the opportunity to align their wealth with their values.

Finding Purpose in the Work

My roles at Bair Financial Planning and the Wealth Consulting Group have evolved from being an investment committee member to assisting with ESG portfolios to actually specializing and being the main point person on our suite of sustainable investing solutions. This work energizes me; there’s a lot we have to do as advisors, and research is time-consuming, but I really enjoy it.

After 18 years working in this space, I’m regularly asked to speak to advisors taking the US SIF Fundamentals of Sustainable and Impact Investment course about how to talk to clients about sustainable investments, how to talk to advisors, and how this plays out in reality versus a textbook context.

I’m aware that when it comes to sustainable investing, I have it easier than many other advisors: We have a diverse team, we’re in Southern California, and there’s not much friction in talking about investing with ESG analysis. However, an advisor anywhere in the world can have a client with a strong interest in investing according to their values. Understanding ESG and sustainability principles can help you provide a more personalized experience.

On Doing Well While Doing Good

Investment funds utilizing ESG data can observe various risks and opportunities, but they can also include some underlying exclusionary screens which could align with investors. I’ll give you a concrete example. When there were headlines about private prison companies’ facilities holding families at the border, our practice had clients call to ask, “Do I own private prison firms in my portfolio?”

Or unfortunately, when there is a shooting, clients ask: “How exposed am I to firearms?” When we get those inquiries, we have the ability to respond based on what that topic may be. That allows us to not be fixated on one issue or the other. No one fund is going to capture everyone’s values nor are a set of values equally important to everyone. However, there can be some common screens that could be of interest to investors as a starting point in comparison to other funds not considering those exclusions at all.

Our Approach: Get Loud

We understand other practices incorporate these strategies differently, but for us, we try to do an all-or-nothing solution—a complete ESG portfolio, or a non-ESG portfolio. Within an ESG portfolio, we can incorporate various thematic solutions—certain sleeves of the portfolio can be focused on gender diversity, water infrastructure, environmental markets, and so forth.

Another side of our approach is engagement. We tell our clients that we want to hire asset managers who are going to cause a ruckus with your capital. We’re looking at it from a qualitative standpoint. The shareholder resolution filings that our asset managers are creating, and the proxy voting that a fund manager or portfolio manager may be doing based on the shares they own on behalf of our clients are critical. In the active versus passive debate, that’s the big difference between the active mutual fund manager versus maybe a passive ETF manager in this space.

We have a shareholder advocacy report on our website that highlights stories of shareholder resolutions and voting outcomes of various asset managers. That’s one of the main ways we show clients the impact of their capital, versus an estimate like, “You took 200 cars off the road this year.”

We can give clients the opportunity to gain that extra rigor. We’re helping them try and create change from the inside out.

How to Start the Values Alignment Conversation

Holistic financial planners know there’s more value and more insight in the “off the balance sheet” items: The family dynamic, the family values. It’s not truly a holistic approach to planning if we don’t understand what all this work is for.

I think a lot of advisors are scared to go there, and they don’t want to have that deep conversation, or they don’t want to talk about politics or religion with a prospect.

For us, it’s like, why wouldn’t you? Why keep things taboo? It’s good to understand the whole person. That’s why our clients really like us—we’re very transparent. It’s not hard to know what our view may be on various topics. Clients can be their true, authentic selves with us.

I think it’s just about giving the space for the client to communicate, in our onboarding forms, and just in conversation, what’s important to them.

My Top 3 Tips for Diving In

So, how can advisors get started with sustainable investing? Here are my top three tips.

1. Get the Lay of the Land Before You Launch

I often say to advisory practices, take time educating yourself within the space, and find out where you want to be on the spectrum. The US SIF Foundation has courses geared toward advisors that can be a great start, and you can also look into the CSRIC® designation. US SIF is a fantastic organization. I recommend seeking out their content.

2. Make Sure Your Solutions Match Your Messaging

You don’t want to go out to the marketplace with communications that are out of sync with what you’re offering clients. These resources can help you do your due diligence.

Morningstar’s Sustainability Screener enables users to search for funds based on personal sustainability preferences. Morningstar has been a leader in this type of data.

As You Sow is a great resource that does excellent screening.

YourStake provides explainable ESG analysis and reporting tools to financial advisors. We’re using it more of an internal due diligence process than a client-facing tool, but they have fantastic client-facing capabilities.

Ethos is a very similar tool to YourStake that’s out there.

The US SIF resource directory is focused on US SIF members. If a company is a member of US SIF, they’re trying to be present in that space, and that’s usually a good place to start to do very high-level screening.

Calvert has a transparency tool that’s helpful as well. It’s powered by Morningstar data and is free for financial professionals to use.

3. Clarify Your “Why”

With today’s anti-ESG rhetoric going around, you must be clear on what you’re trying to achieve for clients with sustainable strategies. If you would balk when the going gets tough, you should be very careful in proceeding.

You need to have enough knowledge to be confident in what you’re doing. There’s a lot that comes with the territory. If you’re thinking about making the leap, really spend some time and think about how you would address questions or criticism from clients.

If you’re going to do it, do it with intentionality and authenticity.


DISCLAIMER: The eMoney Advisor Blog is meant as an educational and informative resource for financial professionals and individuals alike. It is not meant to be, and should not be taken as financial, legal, tax or other professional advice. Those seeking professional advice may do so by consulting with a professional advisor. eMoney Advisor will not be liable for any actions you may take based on the content of this blog.

The views and opinions expressed by this blog post guest are solely those of the guest and do not necessarily reflect the opinions of eMoney Advisor, LLC. eMoney Advisor is not responsible for the content, views or opinions presented by our guest, nor may eMoney Advisor be held liable for any actions taken by you based on the content, views or opinions of the guest.

Image of Victor Orozco, CSRIC®
About the Author

Victor Orozco, CSRIC®, is one of the managing partners at Bair Financial Planning. He also sits on the Investment Strategy Committee for the Wealth Consulting Group and co-manages the High Impact Portfolios. These portfolios consider Environmental, Social, and Governance factors in addition to financial due diligence when evaluating investment options. He helped establish the Sustainable Investing Study Group at LPL and is a member of Nuveen's Responsible Investing Council.

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