Morningstar Panel: Sustainable investing is personal investment


With the whirlwind of terminology, the tide of investment product marketing, and the dizzying amounts of data, many advisors don’t feel comfortable having the “sustainable investing” conversation with their clients.

Still, there’s plenty of research to suggest clients would appreciate it, said Cheryl Gustitus, executive vice president of Sustainalytics, owned by Morningstar, a provider of sustainability investing data, during a panel on sustainability investing at the Morningstar Investment Conference.

The terminology around the investment philosophy is the first hurdle, be it sustainable investing, impact investing, environmental, social and governance investing – the definitions and the dividing lines between them are not always clear.

One way to reduce noise is to steer the conversation with customers in terms of “personal” investment, Gustitus said. This is what advisers do best, she said. “Advisors are the best at this personal interaction with their clients. »Creating portfolios that reflect their values ​​can be a natural part of the customer relationship.

“Definitions and terminology can have a big impact on how successful an advisor is or not,” said Kristina Van Liew, Managing Director of Graystone Consulting. “But you can’t take a one-size-fits-all approach. ”

Unlike traditional investment advisers, impact advisers need to think in three dimensions: risk and return, and impact. Advisors quickly learn that it requires a different conversation, a unique view of a client’s goals and, in turn, a unique portfolio built around those values ​​and also a different approach to performance reporting.

“Everyone’s definition of positive impact is different, so no two programs are alike,” she said.

The process of discovering customers becomes much more important in sustainable investing, Van Liew said. “It is the advisor’s responsibility to listen and to think carefully about building a portfolio” suited to the client’s objectives.

“You don’t do this by just looking for investment products” or funds with the right ESG labels, she said.

The rapid increase in the amount of data on the environmental, social and governance qualities of investments is adding to the confusion around the terms.

“It’s a race for data,” said Gustitus. “Not just securities coverage. But in terms of the data points that underpin the mechanisms for advisers to report in useful and meaningful ways to clients.

One panelist compared the confusion to the early days of ETFs or 529 plans that had to be carefully explained to clients.

“It’s like those examples but on steroids. It’s not only hard to explain, but it means something different for every investor, ”said Oliver Stracey, Executive Director and Head of Sustainable Investing Marketing at JP Morgan Asset & Wealth Management.

Stacey said that JP Morgan has, over the past five years, invested heavily in data aggregation and reporting on ESG data that can be used not only in impact investing, but for all managers. asset portfolio of the company, as these types of non-financial but still important information about, for example, carbon footprint or board diversity, become increasingly linked to investment decisions.

“It’s still something of a niche business, and widely rejected by the investment consulting community,” Van Liew said. But counselors who can be successful at this will find the skill “in high demand.”

“It creates more endearing and sticky relationships. Investments have taken on a new relevance, ”she said. But taking such a personal approach to a client’s portfolio means advisers can’t fake it with a standard investment fund.

“It’s a category on authenticity. You have to be genuine to do the job, ”she said.


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